TOKYO: Japan’s wholesale inflation slowed in January but hovered near the record pace hit in November, data showed yesterday, a sign persistently high raw material costs were prompting more firms to raise prices.

       While the mounting cost pressure could push up consumer inflation in the coming months, it risks hurting a fragile economic recovery as household spending takes a hit from a spike in Omicron new coronavirus variant cases.

       The corporate goods price index (CGPI) rose 8.6% in January from a year earlier, marking the 11th straight month of gains and exceeding a median market forecast for a 8.2% gain.

       The index, at 109.5, was the highest since September 1985.

       While the pace of increase slowed from 8.7% in December, it remained near the record 9.2% increase marked in November.

       “The big picture hasn’t changed. Global commodity inflation is having a big impact on domestic wholesale prices,” said Shigeru Shimizu, head of the Bank of Japan’s (BoJ) price statistics division.

       “More firms are passing on higher costs to customers as raw material prices remain high,” he told a briefing.

       Fuel, steel and chemical prices were key drivers of the increase, underscoring the fallout from global commodity inflation on Japan’s economy.

       In a sign inflationary pressure was broadening, food and beverage goods prices rose 3.4% in January from a year earlier, accelerating from a 3% gain in December.

       Roughly 10% of food and beverage items that make up the CGPI saw prices rise, suggesting cost pressure could start to push up consumer inflation in the coming months.

       While Japan has not been immune to rising commodity inflation, firms have been cautious about passing on higher costs to consumers on concerns cost-sensitive households may hold back on spending.

       But there have recently been signs of change with companies raising or announcing price hikes for goods ranging from snacks, instant noodles and mayonnaise.

       BoJ officials have said consumer inflation won’t sustainably accelerate toward their 2% target unless such price hikes are accompanied by wage increases.

       Japan’s core consumer prices rose just 0.5% in December from a year earlier, well below the BoJ’s 2% target.

       Meanwhile, Japan’s core consumer inflation likely slowed in January from the previous month, a Reuters poll showed, reinforcing expectations the country’s central bank will lag well behind other economies in raising interest rates.

       Separate data is also expected to show Japan likely ran the biggest trade deficit in eight years in January as persistent rises in fuel and raw material costs swelled imports, according to economists polled by Reuters.

       The nationwide core consumer price index likely rose 0.3% in January from a year earlier, slowing from a 0.5% gain in December, the poll of 16 economists showed on Friday.

       The slowdown is largely due to one-off factors such as the base effect from a suspension of the government’s travel discount campaign in late 2020.

       When stripping away such temporary factors, consumer inflation is likely to be perking up, analysts say.

       “Imported goods prices have been rising, and the effect is spreading to previously soft domestic prices,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

       And yet, many analysts expect consumer inflation to remain distant from the BoJ’s 2% target for the time being, forcing the central bank to maintain ultra-loose policy. — Reuters