Author: Leica Kihara
TOKYO (Reuters) – Japan’s annual wholesale inflation held steady at 3.8% in December due to stubbornly high food costs, data showed on Thursday, underscoring ongoing price pressures that could prompt the central bank to raise interest rates next week.
The data comes after Bank of Japan Governor Kazu Ueda’s remarks on Wednesday that the bank will discuss whether to raise rates at its January 23-24 meeting, signaling it will increase borrowing costs in addition to market shocks after the election of US President Donald Trump takes office on Monday.
Year-on-year growth in the corporate goods price index (CGPI), which measures the prices companies charge each other for their goods and services, matched the median market forecast and followed an annual increase of 3.8% in November.
The increase was fueled by a 31.8 percent jump in farm produce costs as the price of rice continued to rise. Fuel costs have also risen due to the phasing out of government subsidies aimed at reducing utility and gasoline prices.
An index that measures yen-based import prices rose 1.0% in December from a year earlier, the data showed, a sign that the yen’s weakness continued to inflate companies’ costs.
“Wholesale inflation remains under strong upward pressure,” said Takeshi Minami, chief economist at the Norinchukin Research Institute, adding that Trump’s tariff, immigration and energy policies could affect Japan’s monetary policy, including exchange rate changes.
Wholesale price data, closely watched as a leading indicator of consumer price developments, will be among the factors the BOJ will closely consider when deciding whether to raise interest rates next week.
