Japan’s wholesale inflation accelerates in Sep. ’24

Japan’s wholesale prices continued to rise in September 2024, albeit at a slower pace than in previous months. The corporate goods price index (CGPI) increased by 2.8 per cent year-over-year, driven primarily by a surge in rice prices.

However, the decline in import prices, fuelled by the yen’s rebound and government subsidies, suggests that inflationary pressures from raw material costs are easing.

The Bank of Japan (BOJ) is now focusing on whether domestic demand-driven inflation can take hold in Japan’s economy.

While the yen-based import price index fell by 2.6 per cent in September, rising crude oil prices and a stronger dollar could support domestic inflation.

Economists believe that if higher wages lead to increased consumption, the BOJ may consider further interest rate hikes.

The central bank ended negative interest rates in March and raised short-term borrowing costs to 0.25 per cent in an effort to achieve its two per cent inflation target.

However, the BOJ emphasises that inflation must be driven by domestic factors rather than rising raw material costs to become sustainable.

Attribution: Reuters

Subediting: M. S. Salama