Record surge in Japan wholesale import costs rekindles weak yen concerns

The yen-based imported goods prices surged 43.3 per cent in May from a year earlier. PHOTO: REUTERS

TOKYO (REUTERS) - Japan's wholesale inflation moderated in May but yen-based import prices surged at a record annual pace, underlining that the currency's slump was becoming a major strain for an economy heavily reliant on commodity imports.

The data casts doubt on the central bank's argument that households' rising living costs are due largely to global commodity inflation and has little do to with a weak yen.

The corporate goods price index (CGPI), which measures the price of goods that companies charge one another, rose 9.1 per cent in May from a year earlier, Bank of Japan (BOJ) data on Friday (June 10) showed, smaller than a median market forecast for a 9.8 per cent gain.

The pace of increase slowed from a record 9.8 per cent rise in April, due largely to the effect of government subsidies aimed at capping petrol prices.

But the index, at 112.8, hit a record high as more than 80 per cent of components saw prices rise from year-before levels.

"Price hikes are broadening particularly for food and beverage items," Mr Shigeru Shimizu, head of the BOJ's price statistics division, told a briefing.

"The big picture remains the same in that rising global commodity costs are pushing up Japan's wholesale prices."

The yen-based imported goods prices surged 43.3 per cent in May from a year earlier, the fastest pace of gain since comparable record became available in January 1981.

Daiwa Securities analyst Toru Suehiro said: "Imported goods prices continue to rise and inflationary pressure is strong."

He added that "if the dollar rises to around 140 yen, the weak yen will become the main driver" of wholesale price gains.

The yen stood at 134.16 per dollar on Friday, hovering around the 20-year low that it has straddled recently.

Global commodity inflation driven by the war in Ukraine and the yen's falls to two-decade lows have pushed up wholesale prices in Japan, squeezing retailers' profits.

Companies are gradually passing on the higher costs to households. Core consumer prices rose 2.1 per cent in April from a year earlier, much slower than the pace of increase in Western economies but exceeding the BOJ's 2 per cent target for the first time in seven years.

BOJ governor Haruhiko Kuroda has repeatedly said a weak yen benefits Japan's economy in broad terms, and that the central bank will not raise interest rates in response to what it sees as temporary, cost-push inflation.

But opposition lawmakers are turning up the heat on the BOJ, blaming it for the rising cost of living ahead of an Upper House election next month.

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