Japan Wholesale Prices Continue To Surge As Import Costs Hit Record

Japan
FILE PHOTO: A shopper wearing a protective mask pushes a shopping cart at Japan’s supermarket group Aeon’s shopping mall as the mall reopens amid the coronavirus disease (COVID-19) outbreak in Chiba, Japan May 28, 2020. REUTERS/Kim Kyung-Hoon

TOKYO ⸺ Japanese wholesale prices continued to surge in June as import costs spiked at the fastest pace on record, data showed on Monday, a sign rising raw material costs were weighing on corporate profits.

Households may also start to feel the pinch as recent increases in oil costs are likely to push up consumer inflation in coming months, though the rebound will be more modest in Japan than in other advanced nations due to weak demand, analysts say.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 5.0% in June from a year earlier, Bank of Japan data showed, beating a median market forecast for a 4.7% gain.

It followed a 5.1% increase in May, which was the fastest pace of growth since September 2008, and marked the fourth straight month of year-on-year gain.

“Wholesale prices will remain under upward pressure as steady COVID-19 vaccinations continue to support the global economic recovery,” said Shigeru Shimizu, head of the BOJ’s price statistics division.

“More and more companies are being able to pass on higher costs,” mainly in sectors like steel and energy, he said.

Of the 744 items consisting CGPI, the number of items that saw prices rise in June exceeded that for price falls by 75 – up from 57 in May.

In a sign a weak yen was inflating raw material costs for firms, the yen-based import price index surged 28.0% in June to mark the fastest year-on-year gain on record.

An index gauging raw material prices jumped 49.8% in June from a year earlier, as commodities ranging from fuel oil to wood see prices spike on solid global demand.

On the other hand, domestic final goods prices – which loosely track the consumer price index – rose just 2.0% in a sign weak domestic demand was still discouraging many firms from passing on the higher costs to their corporate customers.

Japan’s economy is recovering moderately as robust exports offset some of the weakness in consumption. But a resurgent coronavirus forced Japan to declare a state of emergency in the capital Tokyo that will last through the Olympics Games, casting doubts over the strength of the recovery.

Reporting by Leika Kihara; Editing by Sam Holmes; Reuters

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