Japan wholesale inflation hits 13-year high as import costs rise

August 12, 2021

By Leika Kihara

TOKYO (Reuters) – Japanese wholesale prices rose in July at their fastest annual pace in 13 years, data showed on Thursday, a sign the global commodity inflation and a weak yen were pushing up raw material import costs for a broad range of goods.

There is uncertainty, however, on whether companies will start to pass on the higher costs to households and prop up consumer inflation, which remains stuck around zero due to weak consumption, unlike in other advanced nations, analysts say.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 5.6% in July from a year earlier, Bank of Japan data showed, beating a median market forecast for a 5.0% gain.

It accelerated sharply from a 5.0% increase in June and marked the fastest pace of growth since September 2008, when the index rose 6.9%, the data showed.

On a month-on-month basis, wholesale prices rose 1.1% in July after gaining 0.6%, marking the biggest increase since October 2019, the data showed.

Wholesale prices rose for many raw materials including those for wood prices, which spiked 33.1% in July from a year earlier, and oil and coal goods, which saw prices rise 38.8%, the data showed.

“We’re seeing a wide range of wholesale price goods rise reflecting the global recovery, which is pushing up commodity costs,” said Shigeru Shimizu, head of the BOJ’s price statistics division.

“Japan’s wholesale prices will likely remain under upward pressure for the time being, though there’s uncertainty on how a global resurgence in COVID-19 infections could affect the outlook,” Shimizu told a briefing.

Japan’s economy is recovering moderately as robust exports offset some of the weakness in consumption. But a resurgent coronavirus forced Japan to reimpose state of emergency curbs, casting doubts over the strength of the recovery.

(Reporting by Leika Kihara; Editing by Sam Holmes)