Japan wholesale inflation hits 13-year high, squeezing corporate profits

TOKYO (CNA) – Japan’s wholesale inflation hit a 13-year high in September as rising global commodity prices and a weak yen pushed up import costs, putting pressure on corporate margins and raising the risk of unwanted consumer price hikes.

Rising input costs are adding strain for manufacturers already hit by supply constraints and clouding the outlook for the world’s third-largest economy, which relies on exports to cushion the blow from soft consumption, analysts said.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, surged 6.3 per cent in September from a year earlier, Bank of Japan data showed yesterday, exceeding market forecasts for a 5.9 per cent gain.

The increase accelerated from a revised 5.8 per cent rise in August to its fastest pace since September 2008, the data showed.

“If rises in raw material costs accelerate, companies selling final goods prices will see profits squeezed. As Japan is a net importer of fuel, such cost-push inflation could hurt the economy,” said senior economist at Daiwa Securities Toru Suehiro.

Rising oil prices pushed up petroleum and coal costs by 32.4 per cent in September, while prices of wood products spiked 48.3 per cent. An index gauging yen-based wholesale import prices surged a record 31.3 per cent in September from a year earlier, suggesting a weak yen – usually a boon to the economy by lifting exports – could hurt growth by squeezing the bottom line for corporations.

People walking past stalls in the Ameyoko shopping district in Tokyo’s Taito Ward. PHOTO: AFP/JIJI