(CTN News) – Data released on Tuesday revealed that Japan’s wholesale inflation decelerated significantly in November, primarily driven by the decline in fuel and commodity prices.
This indicates a reduction in cost-push pressure within the world’s third-largest economy.
The latest figures support the Bank of Japan’s belief that inflation driven by commodities will gradually diminish. Consequently, attention now shifts to whether domestic demand will be robust enough for the central bank to phase out its stimulus measures.
According to the data from the Bank of Japan, the corporate goods price index (CGPI), which measures the prices charged by companies for their goods and services, increased by 0.3% in November compared to the previous year. This exceeded the median market forecast of a 0.1% rise.
This follows a 0.9% increase in October and marks the 11th consecutive month of deceleration since December of the previous year when wholesale inflation reached 10.6%.
While the slowdown can be partly attributed to the base effect of last year’s significant surge in raw material costs, some analysts anticipate that wholesale prices will begin to decline from December onwards due to the slump in oil prices and the recent appreciation of the yen.
Takeshi Minami, the chief economist at Norinchukin Research Institute, stated that there is a possibility of wholesale prices declining in the first half of the upcoming year. This decline could potentially have an impact on consumer inflation.
He further mentioned that considering the economic outlook, prices, and currency markets, the Bank of Japan (BOJ) might adopt a cautious approach toward normalizing its easy monetary policy.
The BOJ closely monitors wholesale inflation as it serves as a key indicator for consumer price movements.
Despite consumer inflation surpassing the 2% target for an extended period, the BOJ emphasizes the importance of maintaining its ultra-loose monetary policy until price increases are driven by robust domestic demand and accompanied by stronger wage growth.