Japan’s wholesale price inflation soars in May – data

Japan’s wholesale inflation surged in May, marking its sharpest increase in nine months. The rise was driven by a weaker yen, which raised the cost of importing raw materials.

The data presents a challenge for the Bank of Japan (BOJ) as it grapples with how soon to raise interest rates. While rising prices might seem positive, they are currently driven by cost pressures, not strong demand.

This raise concerns that consumer spending could cool, hindering the BOJ’s goal of achieving demand-driven inflation before further tightening monetary policy.

The corporate goods price index (CGPI) rose 2.4 per cent in May, exceeding market forecasts of a 2.0 per cent gain. This follows a 1.1 per cent increase in April, marking the fourth consecutive month of acceleration. Higher prices for utilities, petroleum, chemicals, and nonferrous metals fueled the increase.

BOJ meeting and policy outlook:

The BOJ is expected to maintain its ultra-loose monetary policy at its upcoming two-day meeting ending on Friday. It is expected to keep rates within zero to 0.1 per cent.

Governor Kazuo Ueda has indicated that the BOJ will only consider further rate hikes if they have strong confidence that underlying inflation will reach and sustain the projected two per cent target.

Attribution: Reuters

 

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