Japan’s wholesale inflation holds steady at 0.9% in April

Japan’s wholesale inflation remained unchanged at 0.9 per cent in April, but a weakening yen pushing up import costs could trigger another Bank of Japan (BOJ) interest rate hike soon, Reuters reported on Tuesday.

The year-on-year rise in the Corporate Goods Price Index (CGPI) matched analyst forecasts and followed March’s 0.9 per cent increase.

However, the yen-based import price index jumped 6.4 per cent year-on-year in April, compared to 1.4 per cent in March, reflecting the currency’s decline.

Rising import costs will likely heighten inflation pressure, said Toru Suehiro, Chief Economist at Daiwa Securities. The BOJ might raise rates if cost-driven price hikes become excessive, he added.

While the BOJ ended negative rates in March aiming for sustained two per cent inflation, Governor Kazuo Ueda emphasised hikes only for robust domestic demand and wage growth, not immediate cost-driven inflation. However, he acknowledged the possibility of exceeding inflation targets due to the yen’s impact.

A weak yen benefits exporter but strains policymakers by raising import costs and hurting consumer spending.

Japan’s core consumer inflation, the BOJ’s key gauge, reached 2.6 per cent in March, exceeding the two per cent target for two consecutive years.