Daily Management Review

Ukraine War And A Weak Yen Hold Japan's Wholesale Inflation Close To Historic High


Ukraine War And A Weak Yen Hold Japan's Wholesale Inflation Close To Historic High
According to figures released on Tuesday, Japan's wholesale inflation stayed near record highs for the month of March, as the Russian invasion of Ukraine and a weak yen pushed up gasoline and raw material costs, putting additional strains on the resource-poor economy that is heavily reliant on imports.
Analysts argue that while rising wholesale prices will help push consumer inflation closer to the central bank's elusive 2% objective, it will damage an economy still recovering from the coronavirus pandemic.
According to data, the corporate goods price index (CGPI), which gauges the price corporations charge each other for their goods and services, increased 9.5 per cent in March compared to the same month a year ago.
This came after a revised 9.7 per cent growth in February, the fastest on record, and outperformed a median market projection of 9.3 per cent gain.
The Bank of Japan (BOJ) reported that the March index, at 112.0, was at its highest level since December 1982.
"With raw material costs rising so much, companies won't be able to make money unless they raise prices. The days of discount war are over," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"Core consumer inflation may accelerate to around 2.5% later this year and stay above 2% for longer than initially expected, weighing on consumption and the economy," he said.
The statistics indicated that the yen-based import price index increased 33.4 per cent year over year in March, indicating that the yen's recent losses are boosting the cost of imports for Japanese companies.
As lacklustre wage growth weighed on consumption, Japanese corporations were slow to pass on increased costs to consumers, keeping consumer inflation considerably below the BOJ's target of 2 per cent.
However, experts predict core consumer inflation to pick up from April to roughly 2 per cent, owing to rising gasoline prices and the dissipation of previous cellular fee decreases.
Analysts believe the BOJ may revise up its inflation prediction at its next quarterly review on April 28 as a result of the rising inflationary pressure.
Core consumer inflation is expected to touch 1.1 per cent in the year that began in April, according to the bank's latest prediction.