Japan wholesale prices hit record 10% as energy costs soar

By Daniel Leussink

TOKYO (Reuters) -Japan’s wholesale prices in April jumped 10% from the same month a year earlier, data showed on Monday, rising at a record rate as the Ukraine crisis and a weak yen pushed up the cost of energy and raw materials.

The surge in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, marked the fastest year-on-year rise in a single month since comparable data became available in 1981.

The gain followed a revised 9.7% increase in March, and was higher than a median market forecast for a 9.4% increase.

Unlike other central banks worried about surging inflation, the Bank of Japan (BOJ) has kept its ultra-easy monetary policy in place on the view that the cost-push rise in inflation is not bringing long-term price expectations to its 2% target.

“Companies have been trying to absorb the rising costs by corporate efforts, but from last year onwards that has become harder for them to endure,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“They will be left no choice but to pass on those extra cost.”

Japanese firms have been slow in passing on rising cost to households as soft wage growth does little to help consumer sentiment and makes them cautious about scaring off consumers with price hikes.

The yen-based import price index jumped 44.6% in April from a year earlier, Monday’s data showed, a sign the yen’s recent declines are inflating the cost of imports for Japanese firms.

The BOJ last month projected core consumer inflation to hit 1.9% in the current fiscal year that started last month before moderating to 1.1% in fiscal 2023 and 2024 – a sign it sees current cost-push price rises as transitory.

But analysts expect consumer inflation to hover around 2% in the coming months as the high raw material costs force more firms to hike prices, posing a risk to Japan’s fragile economic recovery.

“Everything ultimately depends on whether consumers accept price hikes,” said Minami. “While they’re likely to be okay with it to some extent, they won’t fully accept it, leading to a spending decline.”

Data on Friday is expected to show Japan’s core consumer price index (CPI), which excludes volatile fresh food costs but includes energy costs, rose 2.1% in April from a year earlier, slightly exceeding the BOJ’s target, a Reuters poll showed last week.

(Reporting by Daniel Leussink; Additional reporting by Kentaro Sugiyama; Editing by Kenneth Maxwell and Jacqueline Wong)