By Max Sato
(MaceNews) – Producer prices in Japan surged at the fastest annual pace in four decades, as the pandemic-caused global supply chain disruptions, labor shortages and reopening demand have pushed up the costs for production and shipments, data released Thursday by the Bank of Japan showed.
The depreciation of the yen has also boosted import costs.
Inflation in the upstream of production has been soaring in Japan, just as in other major economies, but consumer inflation remains just above zero despite markups in fuel, utility and processed food prices, and is expected to pick up only gradually toward 1% in the next few years.
Retailers are cautious about raising prices for fear of cooling off demand while real wage gains have been small. Japanese firms have tended to maintain employment during the pandemic, which means the gradual reopening of the economy is not causing an acute labor shortage except in the sectors that had already found it hard to secure workers, such as contractors, drivers, servers, and caregivers.
The key points:
* The corporate goods price index (CGPI) soared a preliminary 8.0% on the year in October, the eighth consecutive gain after rising 6.4% (revised up from an initial 6.3%) in September. It was much stronger than the median economist forecast of a 7.0% rise and the largest increase since January 1981, when the index rose 8.1% after 14 months of double-digit percentage gains in the wake of the 1979 oil crises triggered by the Iranian Revolution.
* The increase was led by higher energy and commodity market prices this year, and the pace of increase in fuels picked up again.
* Prices for petroleum and coal products stayed well above year-earlier levels, up 44.5% in October, with the pace of increase accelerating from 32.4% in September. Those for iron and steel gained 21.8% after rising 18.1% the previous month. Lumber and wood products surged 57.0% after climbing 52.2%.
* On the month, the BoJ’s domestic CGPI jumped 1.2% in October, above the consensus call of a 0.4% rise. after rising 0.3% in September. The higher pace of increase was led by refined petroleum products (gasoline and diesel). Iron and steel, chemicals and non-ferrous metals.