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Business Times
2 days ago
- Business
- Business Times
Japan's wholesale inflation slows, taking pressure off BOJ
[TOKYO] Japan's annual wholesale inflation slowed in May on falling import costs for raw materials, data showed on Wednesday, taking some pressure off the central bank to raise interest rates. But the rise in wholesale prices for food and beverages gathered pace in May in a sign global uncertainties and soft consumption are not discouraging firms to pass on higher costs. The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 3.2 per cent in May from a year earlier, data showed, falling short of a median market forecast for a 3.5 per cent gain. It followed a revised 4.1 per cent increase in April and marked the slowest year-on-year rise since a 3.1 per cent gain in September. 'As wholesale inflation slows, consumer prices will also come under downward pressure with a lag,' said Masato Koike, senior economist at Sompo Institute Plus. 'The BOJ may have lost the opportunity to raise interest rates because inflation will have slowed significantly by the time the fog hanging over Japan's tariff talks (with the US) clears,' he said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Prices of steel goods fell 4.8 per cent and those of chemical products were down 3.1 per cent, while non-ferrous metals products saw prices slide 2.1 per cent, the data showed. The yen-based import price index fell 10.3 per cent in May from a year earlier after a 7.3 per cent drop in April, indicating the currency's rebound was pushing down raw material import costs. By contrast, prices of food and beverages rose 4.2 per cent in May, accelerating from a 4.0 per cent increase in April in a sign of simmering inflationary pressure, the data showed. Japan is struggling to reach a deal with Washington in tariff negotiations, clouding the outlook for its economy, which is heavily reliant on automobile shipments to the US. The uncertainty over US trade policy forced the BOJ to cut its growth forecasts on May 1, suggesting the timing of its next rate hike may be delayed despite steadily rising inflation. Japan's core consumer inflation hit 3.5 per cent in April, marking the fastest annual pace in more than two years and exceeding the BOJ's 2 per cent target for more than three years, due largely to a surge in food costs. While the BOJ expects food inflation to moderate later this year, it has signaled its readiness to raise rates again once the economy resumes a recovery on solid wage gains. The BOJ ended a decade-long stimulus programme last year and in January raised interest rates to 0.5 per cent on the view Japan was on the cusp of durably hitting its 2 per cent inflation target. A Reuters poll, taken on May 7-13, showed most economists expect the BOJ to hold rates steady through September with a small majority forecasting a hike by year-end. REUTERS
CNA
2 days ago
- Business
- CNA
Japan wholesale inflation slows, taking pressure off BOJ
TOKYO :Japan's annual wholesale inflation slowed in May on falling import costs for raw materials, data showed on Wednesday, taking some pressure off the central bank to raise interest rates. But the rise in wholesale prices for food and beverages gathered pace in May in a sign global uncertainties and soft consumption are not discouraging firms to pass on higher costs. The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 3.2 per cent in May from a year earlier, data showed, falling short of a median market forecast for a 3.5 per cent gain. It followed a revised 4.1 per cent increase in April and marked the slowest year-on-year rise since a 3.1 per cent gain in September. "As wholesale inflation slows, consumer prices will also come under downward pressure with a lag," said Masato Koike, senior economist at Sompo Institute Plus. "The BOJ may have lost the opportunity to raise interest rates because inflation will have slowed significantly by the time the fog hanging over Japan's tariff talks (with the U.S.) clears," he said. Prices of steel goods fell 4.8 per cent and those of chemical products were down 3.1 per cent, while non-ferrous metals products saw prices slide 2.1 per cent, the data showed. The yen-based import price index fell 10.3 per cent in May from a year earlier after a 7.3 per cent drop in April, indicating the currency's rebound was pushing down raw material import costs. By contrast, prices of food and beverages rose 4.2 per cent in May, accelerating from a 4.0 per cent increase in April in a sign of simmering inflationary pressure, the data showed. Japan is struggling to reach a deal with Washington in tariff negotiations, clouding the outlook for its economy, which is heavily reliant on automobile shipments to the U.S. The uncertainty over U.S. trade policy forced the BOJ to cut its growth forecasts on May 1, suggesting the timing of its next rate hike may be delayed despite steadily rising inflation. Japan's core consumer inflation hit 3.5 per cent in April, marking the fastest annual pace in more than two years and exceeding the BOJ's 2 per cent target for more than three years, due largely to a surge in food costs. While the BOJ expects food inflation to moderate later this year, it has signaled its readiness to raise rates again once the economy resumes a recovery on solid wage gains. The BOJ ended a decade-long stimulus programme last year and in January raised interest rates to 0.5 per cent on the view Japan was on the cusp of durably hitting its 2 per cent inflation target. A Reuters poll, taken on May 7-13, showed most economists expect the BOJ to hold rates steady through September with a small majority forecasting a hike by year-end.
CNA
06-06-2025
- Business
- CNA
Japan's April household spending unexpectedly falls
TOKYO :Japanese household spending unexpectedly fell in April, government data showed on Friday, as consumers tightened their purse strings in the face of higher prices. Consumer spending fell 0.1 per cent in April from a year earlier, according to the internal affairs ministry. That was worse than the median market forecast for 1.4 per cent growth and March's 2.1 per cent increase. On a seasonally adjusted, month-on-month basis, spending declined 1.8 per cent, versus an estimated 0.8 per cent fall. "Consumer spending appears not to be on track for recovery still," said Masato Koike, senior economist at Sompo Institute Plus. Consumption and wage trends are among key factors the Bank of Japan is watching to gauge economic strength and decide how soon to raise interest rates. Hefty pay hikes are seen as essential to counter sharp increases in the cost of living. Major Japanese firms on average agreed to more than 5 per cent pay hikes during annual spring wage talks in March. The monthly wage data released on Thursday showed real wages fell for a fourth consecutive month, eroded by stubborn inflation that has continued to outpace pay hikes, even though base salaries rose at the fastest pace in four months. "It is positive that wages are rising, but prices are eating into those gains, and in April, the negative impact was still stronger," said Atsushi Takeda, chief economist at Itochu Research Institute. On prices, Takeda said inflation probably peaked out in April as the yen gained strength and crude oil prices dropped. Japanese policymakers and analysts are also concerned global trade tensions triggered by U.S. tariffs may weaken wage momentum and complicate the BOJ's efforts to normalise monetary policy. "If corporate earnings are significantly squeezed (because of the tariffs), it will have a negative impact on winter bonuses and spring wage negotiations next year, which could lead to a stagnation in wage increases," said Sompo's Koike.
New Straits Times
09-05-2025
- Business
- New Straits Times
Japan March real wages dip, consumer spending up
TOKYO: Japanese real wages decreased for a third consecutive month in March, squeezed by relentless inflation although consumer spending beat expectations, government data showed on Friday. The mixed wage and spending data highlights Japan's challenging growth outlook, as the export-reliant economy faces tariff threats and uncertainty over monetary policy. Economists are expecting to see a contraction in first-quarter gross domestic product next week. Inflation-adjusted real wages, a key determinant of households' purchasing power, dropped 2.1 per cent in March from a year earlier following a revised 1.5 per cent fall in February and a 2.8 per cent decline in January, labour ministry data showed. The consumer inflation rate the ministry uses to calculate real wages, which includes fresh food prices but not rent costs, rose 4.2 per cent year-on-year in March, easing slightly from February's 4.3 per cent gain but still elevated due to rising food costs. Regular pay, or base salary, grew 1.3 per cent in March, the same pace as in February after a downward revision. But overtime pay fell 1.1 per cent, following February's revised 2.4 per cent growth, indicating a potential softening in business activity. It marked the first dip in overtime pay since September, and the decrease was the sharpest since April last year. Total average cash earnings, or nominal pay, increased 2.1 per cent to 308,572 yen (US$2,132) in March, which was slower than a revised 2.7 per cent rise in the previous month. In March, major Japanese firms on average agreed to more than 5 per cent pay hikes during annual spring wage talks, but the effect of such raises typically begins to show up in the government's wage data for April or later. "Looking ahead, real wages would likely move in positive territory," said Masato Koike, senior economist at Sompo Institute Plus, adding lower oil prices and a stronger yen will put downward pressure on import prices and keep inflation under control. At the same time, Koike said a global economic slowdown from US tariffs could risk stalling wage hike momentum. Meanwhile, separate internal affairs ministry data showed Japan's household spending rose 2.1 per cent from a year earlier, much better than the median market forecast for a 0.2 per cent uptick. On a seasonally adjusted, month-on-month basis, spending rose 0.4 per cent, versus an estimated 0.5 per cent decline. An internal affairs ministry official said increases in utilities and entertainment spending had pushed up overall figures, adding there were signs consumption had picked up in recent months. The official, though, said consumers were still cutting spending on food items because of higher prices. "Real wages are expected to improve, but it is difficult to imagine a significant increase in consumption in the face of increasing uncertainty" like tariffs, Koike of Sompo Institute Plus said.
Yahoo
07-02-2025
- Business
- Yahoo
Japan's household spending beats forecast, but recovery fragile
By Satoshi Sugiyama TOKYO (Reuters) - Japanese household spending rose for the first time in five months in year-on-year terms in December and at a much faster-than-expected pace, but the government said it was too early to call a bottoming out in consumption's downtrend. Consumer expenditure climbed 2.7% in December from a year earlier, data from the internal affairs ministry showed on Friday, better than the median market forecast for a 0.5% uptick. It grew at the fastest pace since August 2022, according to the ministry. On a seasonally adjusted month-on-month basis, spending increased 2.3%, versus an expected 0.2% fall. The increase is largely driven by one-off or seasonal factors such as equipment repairs, automobile purchases and cold weather driving up winter apparel demand, an internal affairs ministry official said. However, the official added it was too soon to say household spending was on a full recovery trend as cost pressures squeezed consumer purchasing power. "There are still areas where people are spending less and being frugal, such as food and utilities," the official said. "We still need to continue to look at whether (the recovery) will continue in the future." Consumption and wage trends are key factors the BOJ is watching to gauge economic strength and determine the need for additional rate hikes. In separate household spending data for the whole of 2024, spending decreased 1.1% from the previous year, as consumers tightened their belts in the face of rising prices. The BOJ raised interest rates to 0.50% in January, the highest in 17 years, signalling its confidence that rising wages will keep inflation stable around its 2% target. December's pay data released on Wednesday showed inflation-adjusted wages rose 0.6% year-on-year thanks to a winter bonus bump, with government officials expressing optimism that wage hike momentum is growing. Going forward, analysts are sceptical of a full-fledged recovery in personal consumption. "Although high wage increases are expected in this year's pay negotiations, the recovery in real wages is expected to be limited due to factors such as the rising cost of food," said Masato Koike, senior economist at Sompo Institute Plus. "We expect real wages to enter positive territory in the second half of 2025, and until then the pace of recovery in consumer spending will also be gradual." Sign in to access your portfolio
