Japan’s wholesale prices rise 7.3% in fiscal 2021, the fastest pace on record

Wholesale prices in Japan jumped 7.3% year-on-year to March 2022 from a year earlier, the fastest pace on record, driven by soaring crude oil and commodity prices Amid economic recovery from the COVID-19 pandemic and Russia’s invasion of Ukraine, Bank of Japan data showed on Tuesday.

Amplified by a weak yen, the record rise since comparable data became available in 1981 came after a 1.4% decline in fiscal 2020. It highlighted the strong impact of commodity price swings. raw materials on Japan, a major energy importer.

The depreciation of the yen pushed up import prices for Japan by 32.7% compared to the previous year. This figure compares to a 12.3% increase in export prices. Both figures are in yen.

In March alone, wholesale prices, or the price of goods traded between businesses, rose 9.5%, marking the second-fastest pace on record after a revised gain of 9.7% in February. They were up for the 13th straight month, according to BOJ data.

The surge in crude oil and commodity prices, accelerated by supply problems following Russian aggression since the end of February, kept upward pressure on prices.

Businesses have passed on rising costs to consumers, but they face a difficult balancing act to ensure profitability without hurting consumer demand.

With its powerful monetary easing helping to weaken the yen, the BOJ is under increasing pressure to convince business management and consumers of the need to leave policy unchanged as its US and European peers move towards policy normalization. , a factor that weakens the yen. .

The Japanese currency slipped to an almost seven-year low against the US dollar.

“Rising commodity prices are pushing up wholesale prices,” a BOJ official said, adding that the crisis in Ukraine is likely to have a continued impact on wholesale prices with an expected lag for some products.

Prices for many commodities surged in fiscal 2021 as economic activity gradually recovered from the initial shock of the COVID-19 pandemic and commodity markets rebounded.

Prices for petroleum and coal products rose 38.3%, lumber and wood products 44.0%. Non-ferrous metals rose 30.5%, while scrap metal prices rose 58.6%.

Despite the surge in wholesale prices, consumer inflation has not accelerated at the same pace. BOJ Governor Haruhiko Kuroda has repeatedly expressed doubts about the sustainability of commodity inflation.

Rising commodity costs have already dampened confidence in Japan’s big business ahead of upper house elections this summer, a key test for Prime Minister Fumio Kishida amid uncertainty looming over the war in Ukraine.

Toru Suehiro, senior economist at Daiwa Securities Co., warned of the risk that companies may not be able to pass on rising costs as much as they would like as long as the economic recovery remains fragile.

“In this case, incomes will be hit, slowing wage growth in an example of ‘unwanted’ inflation,” Suehiro said.

“Rising commodity prices and a weak yen both mean higher costs for consumers. The yen has depreciated rapidly, so the pressure will increase (on the BOJ and the government) for they’re doing something,” he added.

In March, food and drink prices rose 3.8% from a year earlier, marking the biggest rise in more than a decade.

Prices for a wide range of products have risen, from oil and coal, wood and wood products to scrap metal, in part due to the Russian invasion of Ukraine.

Import prices rose 33.4% while export prices rose 13.1% from a year earlier, both in yen.

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