Japan’s annual wholesale inflation slowed in August as the yen’s recovery impacted import costs, easing some pressure off the central bank to address price risks with interest rate hikes. Japan’s corporate goods price index (CGPI) rose 2.5 percent year-on-year in August, reported the Bank of Japan (BOJ), slowing from a 3 percent increase in July.
The Japanese currency’s significant recovery last month impacted the import price index, which rose 2.6 percent after a 10.8 percent surge in July.
Month-on-month, wholesale inflation in Japan fell 0.2 percent in August. The yen-based import price index also declined 6.1 percent compared to July.
The decline in wholesale inflation, which may influence the timing of the Bank of Japan’s next interest rate hike, will also impact the country’s broader consumer price data in the coming months.
Japan’s central bank ended the negative interest rate cycle in March and hiked short-term borrowing costs to 0.25 percent in July, citing steady progress towards durably achieving the 2 percent inflation target.
BOJ governor Kazuo Ueda said that the risk of an inflation overshoot from rising import costs was among the factors that led to the bank’s decision to hike rates in July.
In addition, he signaled the bank’s readiness to raise rates again if consumer inflation remains on track to hit 2 percent in coming years backed by solid wage gains.
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