Japan’s wholesale inflation remained elevated in August, strengthening expectations that the Bank of Japan (BOJ) could raise interest rates at its upcoming policy meeting.

According to BOJ data released on Friday, the producer price index increased 7.6% year-on-year in August, slightly above the 7.4% market forecast. The increase followed a revised 7.7% rise in July.

Import costs have also remained under pressure. Japan’s yen-based import price index climbed 24.8% from a year earlier, reflecting the impact of a weaker yen and higher energy costs. Rising fuel prices linked to the Middle East conflict are adding further pressure to businesses and consumers.

The data could strengthen the case for the BOJ to increase its policy rate from its current 1% level. Markets are already pricing in a strong possibility of a rate increase to 1.25% at the central bank’s next meeting.

Japan’s Finance Minister Satsuki Katayama also said Tokyo would maintain close communication with the United States to promote stability in foreign-exchange markets, highlighting continuing concern over yen volatility.

The developments come as Japan faces a difficult combination of higher energy costs, a weaker currency and persistent inflation. Policymakers will therefore have to balance controlling price pressures against the risk that higher borrowing costs could slow economic activity.