Wholesale Inflation in Japan Fell Below 1%

Japan’s wholesale inflation stalled below 1 per cent in October for the first time in just over two-and-a-half years, and data displayed on Monday a sign that upward price pressures that have increased prices of a wide range of goods have begun to fade.

As stated by Reuters, analysts expressed the slowdown in inflation is in line with Bank of Japan projections and emphasises whether wages and household spending will increase enough to generate demand-led consumer price increases.

Takeshi Minami, chief economist at Norinchukin Research Institute, said wholesale inflation seems to have cooled as past reductions in raw material and energy costs filtered through domestic business-to-business (B2B) prices.

He mentioned that the anticipated outcome of government subsidies aimed at reducing gasoline and utilities costs is expected to result in a deceleration of consumer inflation by the conclusion of the fiscal year ending in March 2024.

He added that the rate of the slowdown in consumer inflation would be humble due to the lack of labour, and higher wages would boost the prices of services.

The corporate goods price index (CGPI), which calculates the prices companies charge each other for their goods and services, increased 0.8 per cent in October from a year earlier, roughly matching the median market forecast for an increase of 0. 9 per cent but significantly reduced from 2.2 per cent in September.

Japan’s Low Prices Cause Slowdown

The data revealed that the slowdown was because of falling prices of wood, chemical and steel products, emphasising the impact of falling global commodity costs.

A sharp climb in wholesale inflation in the prior period prompted many Japanese companies to pass on higher costs to households. This trend initiated the BOJ to raise its inflation forecasts in its quarterly projections released in October.