Japan’s wholesale inflation hits 9%, corporate margins dwindle
Japan’s wholesale prices rose 9 per pcent in August from the previous year, matching the annual pace of growth in July, data showed on Tuesday, signalling that persistently high raw material costs continued to squeeze corporate margins.
The rise in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, was largely in line with a median market forecast for a 8.9 per cent increase, Bank of Japan (BOJ) data showed. The index, at 115.1, extended a record high for the fith straight month in a sign Japan continues to feel the impact of rising global raw material prices.
While recent falls in crude oil and global commodity costs took some pressure off fuel and scrap metals prices, prices rose for a broad range of items that more directly affect retailers such as utility bills and electronic devices, the data showed.
Reflecting easing input pressure, however, wholesale prices rose just 0.2 per cent in August from the previous month, slower than a revised 0.7 per cent month-on-month increase marked in July.
The yen-based import price index rose 42.5 per cent in August from a year earlier, ater a revised 49.1 per cent increase in July, the data showed.
A weak yen has inflated the cost of importing already rising prices of raw material goods, weighing on corporate profits and forcing a growing number of firms to hike prices.
Japan’s core consumer inflation hit 2.4 per cent in July to mark the fastest annual pace in 7-1/2 years, adding to the costs of living for households yet to see much wage gains.
But with inflation still modest compared with many other advanced nations and the economy fragile, the BOJ has pledged to keep interest rates ultra-low and remain an outlier in a global wave of monetary policy tightening.
Japan’s economy expanded an annualised 2.2 per cent in April-june, staging a slower-thanexpected rebound from a Covid-induced slump as a resurgence in infections, supply constraints and rising raw material costs weigh on consumption and output.
Japanese government bond yields fell on Tuesday, as investors scooped up debt at a bargain following a sell-off driven by US peers.
The 20-year JGB yield fell 4 basis points to 0.885 per cent, ater hiting its highest since January
2016 at the end of last week. The 30-year JGB yield fell 4.5 basis points to 1.235 per cent.
“Japan’s yields have been tracking US yields higher, but they have risen close to their peak. Investors bought back the debt at a bargain today,” said Takayuki Miyajima, a senior economist at Sony Financial Group.
“Japanese yields are unlikely to rise any further as speculation that the Bank of Japan would change its ultra-loose monetary policy have also faded recently.”
US Treasury yields have risen recently as Federal Reserve officials stressed the need for more rate hikes to tame soaring inflation, sending interest rate-sensitive two-year Treasury yields to a more than 14-year high last week.
The 10-year JGB yield fell 0.5 basis point to 0.240 per cent. The five-year yield fell 1.5 basis points to 0.035 per cent.
The 40-year JGBS did not trade and the yield stayed at 1.445 per cent. The two-year JGB yield rose 0.5 basis point to -0.075 per cent.
Benchmark 10-year JGB futures rose 0.3 point to 149.01, with a trading volume of 9,622 lots.
Japan’s Nikkei share average closed higher on Tuesday, tracking Wall Street and led by gains in video game maker Nintendo, even as caution prevailed ahead of a key US inflation report.
The Nikkei finished 0.25 per cent higher at 28,614.63 ater rising to 28,659.76, its highest since Aug.26, earlier in the day. Of the index’s 225 components, 128 rose, 86 fell and 11 closed flat. The broader Topix rose 0.32 per cent to 1,986.57. The US S&P 500 rallied more than 1 per cent overnight leading up to Tuesday’s consumer price index report, which will be scrutinised for clues on how aggressive the Federal Reserve’s policy tightening campaign will be going forward.
Energy was the Nikkei’s best performing sector, gaining 0.85 per cent as crude continued its rebound from multi-month lows amid supply concerns heading into the northern hemisphere winter.
Nintendo was the Nikkei’s top performer, climbing 5.51 per cent ater it reported record domestic launch sales for its shooter “Splatoon 3” on the Switch console, outpacing the debut of hit title “Animal Crossing: New Horizons.”
Travel-related shares gained ater a report said on Monday that Japan was planning to waive tourist visa requirements from some countries as part of a further easing of border controls.
Travel agency H.I.S. added 3.88 per cent and airline ANA Holdings rose 2.07 per cent.
“A further easing of border controls will give scope for a re-evalution of Japanese shares,” said Hajime Sakai, chief fund manager at Mito Securities.
The rise in the corporate goods price index, which measures the price firms charge each other for their goods and services, was largely in line with a median market forecast for a 8.9% increase