More Bad News for Japan’s Economy as Wholesale Prices Surge to 13-Year High
Japan is showing signs of inflation heating up as wholesale prices increased at the fastest pace seen in more than a decade during the month
Japan is showing signs of inflation heating up as wholesale prices increased at the fastest pace seen in more than a decade during the month of July, amid the weakness in the yen making it more expensive to import raw materials. Japan’s corporate goods price index (CGPI) surged by 5.6% YoY in July, rising at a faster pace than economists’ forecast and the previous month’s reading of 5% instead.
This was the fastest pace of growth in CGPI seen since September 2008 and is a grave cause for concern for the Japanese economy, which has already been recovering at a far slower pace than several of its peers in the West. The CGPI measures the price that businesses have to pay to avail goods and services from each other, and a higher reading would mean that firms will have to pass on some of these costs to consumers.
This is extremely bad news in an economy that has seen domestic consumption levels remain weak even after easing the restrictions. On the other hand, countries in Europe as well as the US had enjoyed a stronger rebound on reopening their economies on the back of pent-up consumer demand, at least temporarily.
Shigeru Shimizu, the head of the BOJ’s price statistics division, observes, “We’re seeing a wide range of wholesale price goods rise reflecting the global recovery, which is pushing up commodity costs. Japan’s wholesale prices will likely remain under upward pressure for the time being, though there’s uncertainty on how a global resurgence in COVID-19 infections could affect the outlook.”
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