Japan’s Wholesale Inflation Hits Highest in 40 Years

Wholesale inflation in Japan jumped to its highest level in more than 40 years in October, echoing soaring Chinese factory gate prices.

Japan’s corporate goods price index, which measures the cost at which wholesalers buy materials from producers, rose by 8% compared with October last year, and by 1.2% month-on-month. The increase was the biggest since January 1980.

On Wednesday, China reported the highest rate of factory gate inflation in 26 years and official data showed that US consumer prices rose at their fastest rate in three decades.

The rise was driven by sharp increases in the prices of commodities, with petrol and coal among the biggest movers in the index. The two fossil fuels rose 7.9% compared with September. Timber rose 3.6% and iron and steel increased 3.3%.

Analysts expect Japan’s underlying inflation to rebound after it turned positive for the first time this year in September.

“As the drag from mobile phone tariffs fades in the first half of next year, underlying inflation will turn positive,” said Tom Learmouth, Japan economist at Capital Economics.

“Looking ahead, headline inflation may reach around 1.3% early next year as the delayed impact of higher crude oil prices on utility bills filters through,” he added.

Last week, Japan’s new government and the country’s central bank confirmed their commitment to cooperate on achieving 2% inflation, a move set to temper market speculation of an early stimulus exit, local media reported.

Bank of Japan governor Haruhiko Kuroda reaffirmed the commitment in a meeting with senior government ministers in a meeting on November 4, the BoJ said after a meeting with finance minister Shunichi Suzuki and economy minister Daishiro Yamagiwa.