* June producer price index rises 7.1% yr/yr vs forecast

+6.8%

* Yen-based import price index rises at fastest pace since

2022

* Data back up BOJ report warning of faster pass-through of

costs

(Adds milestone, background in paragraphs 8, 11, 13)

By Leika Kihara

TOKYO, July 10 (Reuters) - Japan's wholesale inflation

accelerated in June at the fastest pace in more than three years

as firms aggressively passed on rising costs from the Middle

East conflict, data showed on Friday, bolstering the case for

further interest rate hikes.

The data came in the wake of a Bank of Japan report on

Thursday warning that the pass-through of input costs was

proceeding at a faster pace than in the past, and could lead to

higher consumer inflation later this year.

The producer price index surged 7.1% in June from a year

earlier, BOJ data showed, exceeding the median market forecast

for a 6.8% increase and marking the fastest year-on-year rise

since March 2023. It accelerated from a revised 6.6% gain in

May.

"Wholesale inflation will remain elevated with negotiations

between the U.S. and Iran hitting a roadblock. The impact of

supply constraints and past rises in energy costs will also

spread to prices for various goods," said Masato Koike, senior

economist at Sompo Institute Plus.

"If prices rise sharply for various goods, the BOJ may be

forced to raise rates early including in October," he said.

The spike in producer prices was driven by a 22.8% rise in

fuel prices and a 39.2% jump in non-ferrous metals prices, the

data showed, highlighting the impact of the war-induced energy

shock and robust demand for AI-related raw materials.

A stubbornly weak yen also continued to push up the cost of

raw material imports.

The yen-based import price index in June rose 29.7% from a

year earlier, accelerating from a revised 26.1% gain in May and

rising at the fastest pace since October 2022.

The data will be among factors the BOJ will scrutinise at

this month's policy meeting, when the board is set to keep rates

steady but release fresh quarterly growth and price forecasts

that could offer clues on the timing of the next rate hike.

The Middle East conflict has complicated the BOJ's policy

path, stoking inflation through higher oil prices while

squeezing an economy dependent on imported fuel.

Recent data showed the economy weathering the hit from the

Iran war. The BOJ's "tankan" survey showed business mood hit an

eight-year high and corporate inflation expectations rose to

record levels, helping to make the case for more rate hikes.

In raising its policy rate to a 31-year high of 1% last

month, the BOJ warned of mounting inflationary pressure from the

Iran war by pointing to steady rises in wholesale inflation.

Most analysts polled by Reuters expect the BOJ to raise

rates again to 1.25% by year-end.

The BOJ's communication, however, may be complicated by the

more modest increase in consumer prices. Core consumer inflation

stayed below the BOJ's 2% target for a fourth straight month in

May, partly because government subsidies designed to shield

households from rising fuel costs continued to dampen price

pressures.

"While past oil price rises are pushing up wholesale prices,

consumer prices are rising only moderately due to government

steps," Economy Minister Minoru Kiuchi, seen as an advocate of

loose monetary policy, told a news briefing on Friday.

He also said the boost to inflation from a weak yen comes

with a lag and was "not necessarily that large."