Japan's producer price index (PPI) rose faster than anticipated in August, hovering near its highest level in more than three and a half years and highlighting persistent cost pressures weighed down by a weak yen, preliminary Bank of Japan data showed Friday.

Wholesale inflation increased 7.6% year over year in August, topping the 7.4% consensus forecast tracked by Investing.com. However, it remained near the 7.7% revised growth in July, which was the fastest since February 2023.

Nonferrous metals saw the biggest movement, rising to 43.3% in August from 40.7% in the previous month, followed by scrap and waste, information and communications equipment, and petroleum and coal products.

"The pickup would suggest that upstream price pressures remain elevated, potentially sustaining the pass-through of higher input costs to consumer prices," analysts at ING said in a Sept. 4 note.

On a monthly basis, corporate goods prices decreased 0.2%, reversing the 0.4% revised gain in July and marking the first monthly drop in one year.

The persistent wholesale inflation reinforces expectations for near-term monetary tightening. Most respondents in a Reuters poll anticipate the central bank will raise its benchmark interest rate to 1.25% from 1.0% at its upcoming policy meeting on Sept. 17-18.

A central bank board member earlier flagged the need for an interest rate increase due to increasing cost pressures.

The central bank last lifted borrowing costs to a 31-year high of 1% in June