Japan wholesale inflation hits 13-year high, squeezing corporate profits

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TOKYO (Businesshala) – Japan’s wholesale inflation rose to a 13-year high in September as global commodity prices rose and a weaker yen pushed up import costs, strained corporate margins and increased the risk of unwanted consumer price hikes. Gave.

FILE PHOTO: People wearing protective masks look in a mirror at a shopping mall in Tokyo, amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan August 19, 2021. REUTERS/Athit Perowongmetha/File Photo

Analysts say rising cost costs are adding to stress for manufacturers already hit by supply shortages and tarnishing the outlook for the world’s third-largest economy, which relies on exports to cushion the blow from soft consumption. Is.

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The Corporate Goods Price Index (CGPI), which measures the price companies charge each other for their goods and services, rose 6.3% in September from a year earlier, Bank of Japan data showed Tuesday, up 5.9 percent from market forecasts. For an increase of %.

The data showed that growth grew at the fastest pace since September 2008, up from a revised 5.8 per cent growth in August.

“If the cost of raw materials rises, the prices of the final goods will reduce the profits of the selling companies. As Japan is a net importer of the fuel, such cost-inflation could hurt the economy,” said Toru Suehiro, senior economist at Daiwa Securities.

Rising oil prices drove the cost of petroleum and coal by 32.4% in September, while wood products prices rose 48.3%.

An index measuring yen-based wholesale import prices rose a record 31.3% in September from a year earlier, suggesting the weaker yen – usually a boon to the economy by lifting exports – hurt growth by squeezing the bottom line for corporations. can deliver.

“The double whammy of a fall in the yen value and rising energy costs could be a major blow to Japan’s economy,” said Mari Iwashita, chief market economist at Daiwa Securities.

Still, analysts were skeptical whether the increase in wholesale prices would increase Japan’s consumer inflation, as seen in other economies.

“Most of the increase in wholesale prices will be absorbed by companies with a potentially minor impact on consumers, such as through higher gasoline costs,” said Atsushi Takeda, chief economist at the Itochu Economic Research Institute.

Core consumer inflation was flat in August compared to the previous year, well below the BoJ’s 2% target, as weak household spending prevents firms from raising prices.

Reporting by Leika Kihara; Additional reporting by Kantaro Komiya; Editing by Richard Pullin

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