Wholesale prices in Japan fell for the seventh consecutive month during September, raising fears of a risk of deflation in the country. According to data released by the BOJ, wholesale prices or the CGPI fell by 0.8% YoY in the month of September, after falling by 0.6% in the previous month.

The decline was even steeper than economists’ forecast, which was for a 0.5% fall instead. On a monthly basis, the CGPI fell by 0.1% from August – the first monthly decline seen since four months.

The continued decline in wholesale prices is likely to drive consumer inflation weaker, indicating a contraction in domestic consumption, and heightens concerns that Japan could experience deflation. Markets are expecting the BOJ to revise its inflation forecasts lower from the current 2% target at its rate review meeting later this month.

According to a BOJ official, “With the global economy still reeling from the pandemic’s pain, the pace of its recovery remains modest. That will weigh on Japan’s wholesale inflation.”