TOKYO :Japan’s annual wholesale inflation slowed in June for the third successive month, data from the Bank of Japan showed on Thursday, backing up the central bank’s view that price pressure from rising raw material costs will gradually dissipate.
While food prices continued to rise steadily, some analysts said they expect inflationary pressure to moderate in coming months as pain from U.S. tariffs on Japan’s economy intensifies.
“As wholesale inflation slows, consumer inflation will likely face stronger downward pressure with some lag,” said Masato Koike, senior economist at Sompo Institute Plus.
“Japan’s trade talks with the U.S. seem deadlocked, so it will likely take time for uncertainty to fade. By then, consumer inflation will slow and make it hard for the Bank of Japan to raise interest rates,” Koike said.
The corporate goods price index, which measures the price companies charge each other for their goods and services, rose 2.9 per cent in June from the same month a year earlier, the data showed, matching a median market forecast.
The index, a leading indicator of consumer inflation, slowed from a revised 3.3 per cent in May due partly to falling prices of fuel and metal products, the data showed.
The yen-based import price index dropped 12.3 per cent in June from a year earlier, after a 10.3 per cent decline in May, indicating the currency’s rebound pushed down raw material import costs.
Food and beverage prices rose 4.5 per cent in June on stubbornly high cost of rice, though it slowed from a 4.7 per cent increase in May, the data showed.
The BOJ ended a decade-long stimulus programme last year and in January raised its policy interest rate to 0.5 per cent on the view that inflation was on the cusp of durably meeting its 2 per cent target.
While the BOJ expects food inflation to moderate this year, it has signalled readiness to raise the interest rate again once the economy resumes a recovery on solid wage gain.
The core consumer inflation rate hit a more than two-year high of 3.7 per cent in May, remaining above the BOJ’s 2 per cent target for well over three years, due largely to a surge in food costs.
The interest rate-hike outlook, however, is clouded by uncertainty over U.S. trade policy following President Donald Trump’s latest threat to raise tariffs on Japanese goods to 25 per cent from 10 per cent unless a trade deal is signed by a newly set deadline of August 1.
