Japan’s wholesale inflation picks up as weak yen raises import costs
JAPAN’S wholesale inflation accelerated in June as the yen’s declines pushed up the cost of raw material imports, data showed on Wednesday (Jul 10), keeping alive market expectations for a near-term interest rate hike by the central bank.
Rising global commodity costs and a phase-out of petrol and fuel subsidies also pushed up wholesale prices, the data showed, a sign of heightening inflationary pressure.
The data will be among the factors the Bank of Japan (BOJ) will scrutinise at its next policy meeting on Jul 30 to 31, when the board will release fresh growth forecasts and debate whether to raise interest rates from current near-zero levels.
The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 2.9 per cent in June from a year earlier, BOJ data showed, matching a median market forecast.
It accelerated from the previous month’s revised 2.6 per cent gain and rose at the fastest year on year pace since August 2023. The index, at 122.7, hit a record high for the seventh straight month.
The yen-based import price index climbed 9.5 per cent in June from a year earlier, accelerating from a revised 7.1 per cent rise in May, in a sign the weakening currency was inflating the price companies charge each other for imported raw material. The pace of increase in the index was the fastest since February 2023.
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“Import prices are likely to keep rising due to sustained yen declines and elevated energy prices,” said Yutaro Suzuki, an economist at Daiwa Securities.
“Inflation may accelerate towards autumn reflecting the impact of yen falls since the start of this year, which will be critical to the BOJ’s decision on when to hike rates,” he said.
The BOJ ended eight years of negative interest rates and other remnants of its massive stimulus in March, taking a landmark step towards normalising ultra-loose monetary policy.
BOJ governor Kazuo Ueda has said the central bank will raise interest rates if it becomes more convinced that Japan was on track to durably hit its 2 per cent inflation target.
He has also said the BOJ will take “monetary policy action” if yen moves have a big impact on inflation, a view echoed by BOJ board member Seiji Adachiin late May. REUTERS
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