By Leika Kihara
TOKYO (Reuters) – Japan’s wholesale inflation accelerated in February at the fastest annual pace in roughly four decades on rising fuel costs, a sign inflationary pressures were building up even before the Ukraine crisis triggered a broad-based surge in commodity prices.
The recent war-driven spike in goods prices ranging from oil, metals to grain will likely keep pushing up wholesale prices in a fresh hit to Japan’s resource-poor economy, which is heavily reliant on imported raw material, analysts say.
“Even if the war in Ukraine ends, sanctions against Russia will remain and keep prices high mainly for fuel,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
“The rising inflationary pressure adds to pain for Japan’s consumption, which was already weak compared to that of Western economies, and may delay the country’s recovery,” he said.
The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, jumped 9.3% in February from a year earlier, Bank of Japan (BOJ) data showed on Thurday, marking the fastest annual pace since comparable data became available in 1981.
The rise exceeded market forecasts for an 8.7% gain and accelerated from a revised 8.9% gain in January, mainly due to a 34.2% jump in fuel prices. The February index, at 110.7, was the highest level marked since 1985.
The war in Ukraine has led to a further spike in fuel and commodity prices, which will likely push consumer inflation closer to the BOJ’s 2% target in coming months but also weigh on the fragile economic recovery.
Households and retailers may feel the pain of the recent rise in raw material costs throughout most of the year, as the pass-through of raw material price increases come with a lag.
The recent, war-driven rise in wheat costs will be reflected in domestic flour prices from July, while that of crude oil prices will push up utility bills from around September, a BOJ official told a briefing.
Rising energy costs add strains to Japan’s economy, which is likely to see growth grind to a near halt this quarter as coronavirus curbs and supply disruptions hurt consumption and factory output.
(Reporting by Leika Kihara; Additional reporting by Kantaro Komiya; Editing by Christopher Cushing and Shivani Singh)
