© Reuters. FILE PHOTO: A shopper is reflected in the glass of a mirror as she scans food items at a supermarket in Tokyo, Japan on January 20, 2023. REUTERS/Issei Kato/File Photo
Written by Laika Kihara
TOKYO (Reuters) – Japan’s wholesale inflation flattened in December from a year earlier, slowing for the 12th straight month, underscoring the central bank’s view that cost-rising pressures from rising raw material prices will steadily dissipate.
The data suggests that the rise in consumer price inflation will moderate in the coming months, relieving pressure on the Bank of Japan to phase out its massive monetary stimulus soon.
The reading of the Corporate Goods Price Index (CGPI), which measures the prices companies charge each other for their goods and services, compared with the average market forecast for a 0.3% decline and tracked with a 0.3% increase in November.
The result was the lowest since a 0.9% decline in February 2021, Bank of Japan data released on Tuesday showed.
A Bank of Japan official told a news conference that the slowdown in wholesale prices was partly due to government support to curb gasoline and utility bills, which combined to cut 0.9 percentage points from wholesale inflation.
Prices for steel, chemical and lumber products also fell in December, a sign that weak global demand for some commodities led to lower raw material costs for companies.
But about 80% of items in the index saw prices rise from the previous year’s levels, underscoring expanding inflationary pressure that could help the Bank of Japan reach its 2% inflation target.
Wholesale price data, considered a leading indicator of consumer inflation, are among the factors the Bank of Japan scrutinizes in gauging broader price trends and deciding on the timing of an exit from ultra-loose monetary policy.
At its interest rate review next week, the Bank of Japan is likely to cut its forecast for core consumer inflation for fiscal 2024, but will broadly maintain its view that the inflation trend will remain near its 2% target in the coming months, sources told Reuters.
Bank of Japan Governor Kazuo Ueda stressed the need to keep monetary policy very loose until recent cost-driven price hikes turn into inflation driven more by strong domestic demand combined with rising wages.