Japan's annual wholesale inflation hit 4.0% in February, data showed on Wednesday, underscoring pressure from rising raw material costs that will keep alive market expectations of a near-term interest rate hike by the central bank.

TOKYO] Bank of Japan (BOJ) watchers still expect the pace of interest rate hikes to be gradual, although they now see rates rising to a higher level in the current cycle, according to the latest Bloomberg survey.

Governor Kazuo Ueda on Wednesday took in stride recent rises in bond yields, saying they were a natural reflection of market expectations of future interest rate hikes by the central bank. The remarks underscore the BoJ’s resolve to keep raising short-term interest rates,