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Japan's wholesale prices rise at fastest in nine years, bank lending up

Economic IndicatorsOct 11, 2017 11:30PM ET
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© Reuters. Japan's wholesale prices rise at fastest in nine years, bank lending up

By Stanley White

TOKYO (Reuters) - Japanese wholesale prices rose in September at the fastest annual pace in almost nine years due to rising prices for gasoline, metals, and agricultural products, but the gains won't necessarily boost the country's notoriously weak inflation.

Economists expect consumer prices to rise only gradually because many Japanese companies prefer to absorb higher input costs rather than increasing prices, making it difficult for the Bank of Japan (BOJ) to reach its 2 percent inflation target.

"Prices are rising upstream, but companies are very reluctant to raise retail prices," said Norio Miyagawa, senior economist at Mizuho Securities.

"If anything, I am worried about corporate profit margins. It is difficult for consumer prices to accelerate when companies do not pass on higher costs."

Wholesale prices rose 3.0 percent in September from a year earlier, increasing for the ninth straight month, BOJ data showed on Thursday.

September's gains marked the fastest wholesale price growth since October 2008, excluding the effect of a nationwide sales tax hike in 2014. (The BOJ said the sales tax applies not only to consumers but also to many transactions between companies.)

The rise in the corporate goods price index (CGPI), which measures the price that firms charge each other for their goods and services, matched the median economists' estimate and followed a 2.9 percent annual increase in August.

The BOJ has had to push back the timing for reaching its price target six times since it deployed its massive stimulus program in 2013.

It now hopes consumer inflation will hit its target by March 2020, as signs of strength in the economy and a tight job market boost wages and give households more purchasing power.

Nationwide core consumer prices rose 0.7 percent year-on-year in August, which was faster than July but still well below the 2 percent inflation the BOJ hopes to achieve.

The BOJ next meets on Oct. 30-31, where it will update is consumer price forecasts. There is a chance that one policymaker could formally propose more monetary stimulus after a summary of opinions from the previous meeting showed one member said stronger measures were needed.

Such a proposal is unlikely to win over a majority of the BOJ's nine board members, but it could spur more public debate about whether the BOJ's policies still make sense after it has repeatedly revised the length of time needed to reach its price target.

Japanese bank lending rose 3.0 percent in September from a year earlier, separate data showed. This was a slight slowdown from a 3.2 percent annual increase in August but still indicated healthy credit growth.

Japan's wholesale prices rise at fastest in nine years, bank lending up
 

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