Japan’s wholesale inflation hits a 40-year high as fuel costs rise

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People walk at an intersection in the Shibuya shopping district amid the coronavirus disease (COVID-19) pandemic in Tokyo, Japan, August 7, 2021. REUTERS / Androniki Christodoulou / File photo GLOBAL BUSINESS WEEK AHEAD

  • Wholesale prices are rising faster than expected
  • Oct. Yen-based wholesale import prices rise 38.0% annually
  • Survey shows that more and more companies are warming to the idea of ​​passing on costs

TOKYO, Nov 11 (Reuters) – Japan’s wholesale inflation hit a four-decade high in October after China’s factory gate prices rose similarly as supply shortages and rising raw material costs threatened Asian companies’ profits.

Rising cost pressures, coupled with a weak yen that is driving the prices of imported goods higher, is aggravating the world’s third-largest economy, stemming from the slump in consumer spending caused by the pandemic.

“Rising costs are sure to have a negative impact on corporate profits,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute. “If the economy continues to recover, at some point companies can pass the costs on (to consumers),” he said.

The Corporate Goods Price Index (CGPI), which measures the prices companies charge each other for their goods and services, rose 8.0% year-over-year in October, beating market expectations for a 7.0% gain, according to data the Bank of Japan showed on Thursday.

The increase, which exceeded a revised 6.4% increase in September, was the fastest since comparable data became available in January 1981.

Wholesale prices rose for a number of goods, including fuel, which rose 44.5% year over year in October, and wood goods, which rose 57.0% in prices.

An index that measures wholesale import prices on a yen basis rose to a record 38.0% year over year in October, a sign that recent yen declines drove up already high raw material costs.

Japanese companies have so far been cautious about passing higher costs on to consumers, fearing that cost-sensitive households could hold back their spending. As a result, core consumer prices rose just 0.1% year over year in September. Continue reading

However, a slim majority of Japanese companies say they plan to pass on, or have passed on, raw material costs to customers, a Reuters poll found, a sign that inflationary pressures are mounting. Continue reading

This could deal a worse blow to Japanese consumers than those in other countries in the face of weak wage growth and increase the challenges for Prime Minister Fumio Kishida to deliver on his promise to distribute more wealth to households.

“As the burden on businesses and households increases, the rise in wholesale prices is having a major negative impact on the economy,” said Toru Suehiro, an economist at Daiwa Securities.

With House of Lords elections expected next year, Kishida promised to make a series of cash payments to households as part of a new stimulus package slated to be put together next week. Continue reading

Commodity inflation has hit countries around the world. China’s factory gate inflation hit a 26-year high in October, further depressing profit margins for producers and adding to concerns about stagflation. Continue reading

In the United States, consumer prices rose their largest in 31 years in October

Despite the new price pressures, Japan has lagged the global shift in central banks to reverse crisis mode policies, with BoJ Governor Haruhiko Kuroda pledging to keep monetary policy ultra-loose until consumer inflation hits the elusive target of 2%.

Reporting by Leika Kihara; Additional reporting by Kantaro Komiya and Daniel Leussink; Editing by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.


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