The Bank of Japan announced on Monday that wholesale prices in the country increased at the slowest pace in approximately two years in May. The year-on-year gain stood at 5.1 percent,
with higher raw material costs, but the impact of a weaker yen was diminishing.
While the prices of goods traded between companies continued to rise for the 27th consecutive month, the rate of increase has been slowing down for the past five months. This can be attributed, in part, to government subsidies aimed at lowering fuel costs. The May figure represents the smallest gain since June 2021 when wholesale prices rose by 5.0 percent.
The index measuring corporate goods prices fell by 0.7 percent from the previous month to 119.1 in April, which marked the beginning of the fiscal year. During that period, a wide range of price hikes was observed.
The Bank of Japan asserts that its current ultralow rate policy is necessary as it expects the recent cost-push inflation, driven by rising costs, to decelerate later this year.
Import prices declined by 5.4 percent compared to the previous year, marking the second consecutive month of decline. This easing of pressure on corporate prices can be attributed to the rapid depreciation of the yen last year, especially against the U.S. dollar, which had inflated import costs for resource-scarce Japan. On the other hand, export prices increased by 2.0 percent.
Notable gainers in wholesale prices included food and beverage prices, which rose by 7.9 percent, and minerals, which jumped by 14.7 percent. The cost of electricity, gas, and water bills increased by 13.1 percent, although government subsidies aimed at lowering fuel costs limited the extent of the increase.
However, petroleum and coal products experienced a decline of 1.8 percent after their significant price surges caused by supply concerns related to Russia's war in Ukraine, which had become a major contributor to Japan's inflationary pressures.
A Bank of Japan official stated, "We will carefully monitor the impact of movements in commodity prices and foreign exchange rates on import prices and how higher costs are passed on to consumer products," highlighting the high level of uncertainty that remains. Photo by User: (WT-shared) Shoestring at wts wikivoyage, Wikimedia commons.