Japan’s Wholesale Prices Increase at Fastest Pace Since January 2020
In a boost for the Japanese economy, wholesale prices across the nation rose for the first time in over a year during the month of March, indicating a strong possibility of an upcoming increase in inflation. Japan’s CGPI (corporate goods price index) increased by 1% YoY in March, rising for the first time since 13 months.
The CGPI increased at the fastest pace seen since January 2020, following a decline by 0.6% during February. March’s reading also came in better than economists’ forecast, which was for a rise by 0.5% instead.
The increase was driven by higher commodities prices and are likely to weigh on corporate margins in the near future as companies are hesitant to pass on higher prices to consumers at a time when domestic consumption remains weak in Japan. Analysts observe that the rise in commodities’ prices was the result of improving economic conditions in the US and China, and could not be taken as a sign of improvement in the Japanese economy yet.
Strong external demand has been the key factor that has helped the world’s third largest economy emerge out of the pandemic-driven downturn. However, it faces deflation risks amid a weakness in domestic consumption, despite several measures undertaken by the government and the Bank of Japan to boost spending.
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