A woman looks at items in a store in Tokyo, Japan, March 24, 2023. Portal/Androniki Christodoulou/File Photo Acquire LICENSE RIGHTS
- The October corporate goods price index increases by 0.8% year-on-year compared to the +0.9% forecast.
- Wholesale inflation falls below 1% for the first time since February 2021
- The focus shifts to the question of whether demand-driven inflation is taking over
TOKYO, Nov 13 (Portal) – Japanese wholesale inflation fell below 1% in October for the first time in just over two and a half years, data showed on Monday, a sign that cost pressures were driving up prices had a wide range of goods increasing and began to fade.
The slowdown in commodity-driven inflation is in line with Bank of Japan forecasts and puts the spotlight on the question of whether wages and household spending would rise enough to trigger a demand-driven rise in consumer prices, analysts say.
“Wholesale inflation appears to have cooled as earlier declines in raw material and energy costs feed through to domestic B2B prices,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
The effect of government subsidies to reduce gasoline and electricity bills will likely lead to a slowdown in consumer inflation through the end of the fiscal year ending March 2024, he said.
“But the pace of slowing consumer inflation will be moderate as labor shortages and higher wages will support service prices,” he said.
The Corporate Goods Price Index (CGPI), which measures the price that companies charge each other for their goods and services, rose 0.8% in October from a year earlier, roughly in line with the average market forecast of a 0.9% increase , but cooled significantly from a 2.2% increase in September.
This was the 10th straight month that wholesale inflation slowed, with the annual growth rate below 1% for the first time since February 2021, the data showed.
The slowdown was due to declines in the prices of wood, chemical and steel products, the data showed, highlighting the impact of falling global raw material costs.
The rise in wholesale inflation has led many Japanese companies to pass on higher costs to households, a trend that prompted the BOJ to raise its inflation forecasts in quarterly forecasts released in October.
The BOJ has said that this cost-push inflation will ease and must be replaced by price increases driven more by robust domestic demand so it can consider an end to ultra-low interest rates.
BOJ Governor Kazuo Ueda said Japan was making progress toward sustainably meeting the bank’s 2 percent target, signaling that the conditions for an exit from ultra-loose monetary policy were gradually being created.
Reporting by Leika Kihara. Editing by Shri Navaratnam and Sam Holmes
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