Wholesale Inflation in Japan for August Decelerates as Cost Pressures Subside

13 Sep, 2023

Wholesale Inflation in Japan for August Decelerates as Cost Pressures Subside

Japan's annual wholesale inflation continued its eighth consecutive monthly slowdown in August, offering relief to households and retailers grappling with earlier spikes in raw material import costs. According to data released on Wednesday, the Corporate Goods Price Index (CGPI), which measures inter-company pricing for goods and services, increased by 3.2 percent in August compared to the previous year, in line with market expectations.

This represents a deceleration from the revised 3.4 percent rise observed in July, and it marks a significant drop from the peak of a 10.6 percent year-on-year surge recorded in December of the previous year, as reported by the Bank of Japan (BOJ). Economist Toru Suehiro from Daiwa Securities noted, "While crude oil prices remain elevated and the yen continues to weaken, wholesale inflation is showing signs of slowing down. It might even post a year-on-year decline in the fourth quarter." He emphasized that the declines in prices for certain goods should not be overlooked, as they could influence households' perceptions of future price trends.

The previous surge in global commodity prices and the weakening yen were the primary drivers behind the rising wholesale prices, prompting many companies to increase prices for their goods to consumers. Although consumer inflation has remained above the BOJ's 2 percent target for over a year, the central bank has emphasized the importance of maintaining an extremely accommodative monetary policy until this supply-driven inflation is replaced by a demand-driven increase in prices supported by domestic factors.