Japanese wholesale prices reach highest level in 5 months, depressing corporate profits

Data from the Bank of Japan show that prices for products made by Japanese companies rose by the most in five months, pointing to lower corporate profits as a result of continued strong wholesale inflation.

The BOJ’s Corporate Commodity Price Index (CGPI) rose by 9.7% year-on-year. It measures the prices that companies charge each other for goods and services.

This was the largest annual increase since 9.8% in April and underscores the severe margin pressures companies are facing, as many companies struggle to pass costs on to consumers.

The devaluation of the yen is increasing the cost of imports. Consequently, wholesale inflation has skyrocketed, driven by rising global commodity prices.

The yen-based import price index rose 48.0% in September from a year earlier after the August increase of 43.2%.

This combination pushed the index up to 116.3 – a record high since the survey began in 1960. Electricity costs for businesses and municipal gas utilities were the main drivers of the cost increase. This reflects the increase in fuel costs in the second quarter.

Monthly pressure on production costs remains strong. Wholesale prices rose by 0.7% in September after increasing by 0.4% in August.

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