Official data released on Thursday showed Japan's Producer Price Index (PPI) for July slowed slightly to a 7.2% year-on-year increase, coming in below market expectations.

This figure was lower than the median economist forecast of 7.4% and also declined from the revised 7.3% recorded in June. Electricity prices were the biggest contributor to the producer price index rise in July, adding an extra 0.23 percentage points to the index's gain compared to June. Declining prices for energy and chemical products partially offset the upward pressure from higher electricity costs.

Japan has long been plagued by high energy costs. The continued weakening of the yen has pushed up the dollar-denominated import costs for businesses, thereby intensifying the overall input-driven inflationary pressures on companies. However, despite the elevated producer price index, consumer price levels remain relatively low, with the core inflation rate at 1.6% and the headline inflation rate at 1.9% in June.

Minutes from the Bank of Japan's July meeting revealed that board members warned of potential upside risks to prices due to rising oil prices, with some members calling for faster interest rate hikes to curb inflation.