Corporate profits

Wholesale inflation in Japan hits 13-year high, squeezing corporate profits

By Leika Kihara

TOKYO (Reuters) – Wholesale inflation in Japan hit a 13-year high in September, with rising global commodity prices and a weak yen pushing up import costs, putting pressure on commodity margins. businesses and increasing the risk of unwanted consumer price increases.

Rising input costs are straining manufacturers already hit by supply constraints and clouding the outlook for the world’s third-largest economy, which relies on exports to cushion the blow from weak consumption, analysts said.

The Business Goods Price Index (CGPI), which measures the prices that businesses charge for their goods and services, jumped 6.3% in September from a year earlier, data showed on Tuesday. of the Bank of Japan, beating market forecasts for a gain of 5.9%.

The increase accelerated from a revised 5.8% increase in August to its fastest pace since September 2008, data showed.

“If the rise in raw material costs accelerates, companies selling the prices of finished products will see their profits shrink. With Japan being a net importer of fuel, such cost inflation could hurt the economy, ”said Toru Suehiro, senior economist at Daiwa Securities.

Higher petroleum prices pushed up petroleum and coal costs 32.4% in September, while prices for wood products climbed 48.3%.

An index measuring wholesale import prices in yen jumped a record 31.3% in September from a year earlier, suggesting that a weak yen – generally a boon to the economy by boosting exports – could harm growth by reducing corporate profits.

“A double whammy from a falling yen and rising energy costs could be a big blow to the Japanese economy,” said Mari Iwashita, chief market economist at Daiwa Securities.

Still, analysts doubted that rising wholesale prices would trigger a spike in consumer inflation in Japan, as seen in other economies.

“Most of the increase in wholesale prices will be absorbed by businesses, with the impact on consumers likely to be marginal, for example due to rising gasoline costs,” said Atsushi Takeda, chief economist. at the Itochu Economic Research Institute.

Core consumer inflation remained stable in August compared to the previous year, well below the BOJ’s 2% target, as weak household spending prevents businesses from raising prices. price.

(Reporting by Leika Kihara; Additional reporting by Kantaro Komiya; editing by Richard Pullin)

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