TOKYO- Japan’s wholesale inflation slowed for a fifth consecutive month in May because of sliding fuel and commodity prices, data showed on Monday, a sign cost-push pressure that has driven up consumer inflation may be subsiding.
The data underscores the central bank’s view that consumer inflation will slow in coming months as global commodity prices slide from last year’s peak levels.
The Bank of Japan (BOJ) is expected to maintain ultra-loose policy this week and stick with its forecast for a moderate economic recovery, as robust corporate and household spending cushion the blow from slowing overseas demand, sources have told Reuters .
The corporate goods price index (CGPI), which measures the price companies charge each other for goods and services, rose 5.1 percent in May compared with a year earlier, BOJ data showed, slower than the median market forecast for a 5.5 percent gain.
The rise came after a revised 5.9 percent increase in April and was well off the peak of 10.6 percent hit in December last year, as prices of electricity, fuel, nonferrous metals and chemical goods fell, data showed.
But prices of beverage and food goods rose 7.9 percent in May from a year earlier and those of electric equipment were up 5.5 percent, the data showed, a sign cost pressures for sectors close to households such as retailers and restaurants were showing little signs of abating.
Japan’s core consumer inflation hit 3.4 percent in April as companies continued to raise prices, casting doubt on the BOJ’s view that inflation will slowly move back below 2 percent toward the latter half of the current fiscal year ending in March 2024.
Japan’s core consumer inflation stayed well above the central bank’s 2 percent target in April and a key index stripping away the effects of fuel hit a fresh four-decade high, keeping alive expectations of a tweak to its massive stimulus this year.
The reading comes a few days after data showed the world’s third-largest economy grew faster than expected in the first quarter on a post-COVID consumer rebound.
While raw material costs have peaked, a steady rise in services and food prices highlight broadening inflationary pressure that may prod the Bank of Japan (BOJ) to revise up this year’s price forecast in July, analysts say.
The nationwide core consumer price index (CPI), which excludes fresh food but includes energy items, rose 3.4 percent in April from a year earlier, data showed on Friday, matching a median market forecast and perking up from a 3.1 percent gain in March.
Services inflation accelerated to 1.7 percent in April from 1.5 percent in March, the data showed, suggesting that rising labour costs may be starting to feed into broader consumer inflation.
Food prices also jumped 9.0 percent in April from a year earlier, accelerating from 8.2 percent in March.
An index stripping away the effects of both fresh food and fuel – closely watched by the BOJ as a key barometer of domestic demand-driven price trends – rose 4.1 percent in April from a year earlier, marking the fastest annual pace since September 1981.
With inflation having stayed above its target for a year, markets are simmering with speculation the BOJ will soon phase out its massive stimulus that critics say is distorting markets and hurting financial institutions’ profits.
A poll of analysts projects core consumer inflation to hit 2.3 percent in fiscal 2023. That is much higher than the BOJ’s current projection of 1.8 percent made in April.
The BOJ next meets for a policy meeting on June 15-16. It will revise its growth and inflation estimates at a subsequent meeting on July 27-28.
Analysts polled by Reuters expect Tokyo core consumer inflation, considered a leading indicator of nationwide trends, to hit 3.3 percent in May. The data is due out on May 26. -Reuters
