Wholesale prices hit decades high, cost of goods rises

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The domestic business goods price index for March hit its highest level since 1982, according to preliminary figures released by the Bank of Japan.

Experts warn that a new wave of price hikes is likely to follow in the coming months, even as households struggle to cope with rising prices since late last year.

The CGPI assesses the prices of goods that Japanese companies charge each other, based on wholesale domestic prices, wholesale export prices, and wholesale import prices.

The preliminary index figure for March stands at 112 against 100 recorded in 2015, according to the Bank of Japan report published on April 12.

The CGPI was up 9.5% year-on-year. This is its second-fastest growth rate on record since 1981, when comparable data became available, after February’s 9.7% jump.

The sharp rise was driven by surges in crude oil and grain prices spurred by the global economy‘s recovery from the coronavirus pandemic. It was then pushed higher by a supply chain crisis triggered by Russia’s invasion of Ukraine in late February.

The depreciation of the Japanese currency contributed to an increase in import prices, pushing up prices for oil, including gasoline and light oil, by 27.5%, the biggest increase since 1981.

The country also saw prices for drinks and food rise by 3.8%, including cooking oil.

But the big question over the coming months will be to what extent these price spikes will be passed on to consumer goods and services.

The consumer price index, excluding perishables, marked its sixth consecutive month of increases in February, with gas prices and electricity rates notably soaring.

Economists said rising material costs have yet to be fully passed on to consumers, raising concerns about increased financial burdens on households.

“CPI growth could reach around 2% in April or later,” Bank of Japan Governor Haruhiko Kuroda said.

Koya Miyamae, senior economist at SMBC Nikko Securities Inc., predicted that the inflation rate will not drop this year.

“It will hover between 2.5% and 2.9% in June and after if the government stops providing subsidies to curb rising gasoline prices,” he said. “It would be possible for the rate to rise above 3% if the yen continues to depreciate.”


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