Japan’s wholesale inflation hits 4%, keeps BoJ rate-hike bets alive

TOKYO: Japan’s annual wholesale inflation hit 4.0 per cent in February, data showed on Wednesday, underscoring pressure from rising raw material costs that will keep alive market expectations of a near-term interest rate hike by the central bank.

Wholesale prices, which are a leading indicator of consumer inflation, extended their year-on-year rises to a full four years with a recent spike in the price of rice, eggs and fresh food squeezing companies’ margins, the data showed.

The data adds to growing signs of inflationary pressure, including from major Japanese firms offering bumper pay increases in this year’s wage talks with unions. But the rise in living costs and market volatility caused by US President Donald Trump’s tariff threats could weigh on Japan’s economy and discourage the Bank of Japan from raising rates too quickly, some analysts say.

“It’s worth noting a rebound in consumption, which is necessary to support underlying inflation, is being delayed,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“With exports unlikely to rise much, it would be premature to raise rates until consumption recovers,” he said.

The rise in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, matched a median market forecast.

While it slowed from a 4.2 per cent year-on-year increase in January because of the re-introduction of government fuel subsidies, a wide range of raw materials saw prices rise, including food and nonferrous metal, BOJ data showed.

Yen-based import prices fell 0.7 per cent in February from a year earlier after a 2.3 per cent gain in January.

The central bank ended a decade-long, massive monetary stimulus last year and raised short-term interest rates to 0.5 per cent from 0.25 per cent in January on the view Japan was on the cusp of sustainably achieving its 2 per cent inflation target.

With consumer inflation exceeding its target for nearly three years, the BOJ has signaled its readiness to raise interest rates further if the economy sustains a moderate recovery.

Japan’s Nikkei share average rose in choppy trade on Wednesday as investors bought back shares after sharp declines in the last session, although concerns about US tariffs and their impact on the global economy continued to weigh on sentiment.

After see-sawing between gains and losses throughout the day, the Nikkei closed 0.1 per cent higher at 36,819.09, while the broader Topix gained 0.9 per cent to close at 2,694.91.

Analysts hinted at share buy-backs after the Nikkei fell to a six-month low on Tuesday, while reports that Ukraine would accept a US proposal for a ceasefire with Russia eased the risk-off mood.

But investors treaded carefully ahead of a US inflation report due later in the day, while growth concerns in the world’s largest economy persisted amid US President Donald Trump’s ever-changing tariff policies.

Agencies