Wholesale prices in Japan surged 10.0 percent in April from a year earlier, marking the sharpest gain on record, amid surging energy and raw-material costs following Russia's invasion of Ukraine and the yen's steep fall, Bank of Japan data showed Monday.
The prices of goods traded between companies increased for the 14th straight month, in fresh evidence of inflationary pressures in Japan, reinforcing the view that consumer inflation will further accelerate in the coming months.
The 10.0 percent gain was the fastest since comparable data became available in 1981.
Surging energy and raw-material costs are threatening to eat into corporate profits unless they are passed on to consumers. A growing number of companies are raising prices in line with increasing costs, while consumers are starting to feel the pinch.
Prices of petroleum and coal products jumped 30.9 percent as Russia's war in Ukraine raised supply concerns. Raw materials that saw price hikes included iron and steel, up 29.9 percent, along with lumber and wood products, up 56.4 percent. Nonferrous metals surged 25.0 percent.
The war in Ukraine also affected beverage and food prices, which climbed 3.7 percent. Prices of grain such as wheat grew sharply as both Russia and Ukraine are major producers.
"The rise in wholesale prices was surprisingly large, amplified by the yen's sharp depreciation since March," said Hideo Kumano, executive chief economist at the Dai-ichi Life Research Institute.
"The negatives of the weak yen appear to be outweighing the positives (for the economy). The core consumer price index is almost certain to hit 2 percent...it is yet another difficult time for consumers whose sentiment has been improving as the COVID-19 situation stabilizes," Kumano said.
BOJ Governor Haruhiko Kuroda expects the recent bout of commodity-driven inflation will likely push consumer inflation toward the central bank's 2 percent target. But he has ruled out the BOJ joining its U.S. and European peers in transitioning to tighter monetary policy.
The yen's sharp depreciation, reflecting such policy divergence, also boosted import costs to the detriment of resource-poor Japan. Import prices surged 44.6 percent from a year earlier, compared with a 17.3 percent advance in export prices, both in yen terms, the BOJ data showed.
"We will need to closely monitor the impact of the COVID-19 pandemic and the Ukraine situation on commodity prices as well as domestic demand and supply," a BOJ official said.
Soaring raw material costs have clouded the outlook for manufacturers such as automakers despite the benefits of the earnings-boosting depreciation of the yen.
Toyota Motor Corp. estimates a whopping 1.45 trillion yen ($11 billion) negative impact from higher material costs on an operating basis in fiscal 2022 from April.
So far, consumer inflation has been picking up at a much slower pace than wholesale prices in Japan. The core CPI, excluding volatile fresh food items, rose 0.8 percent in March from a year earlier, with the April data due out Friday.
Some BOJ board members have expressed concern that households have already begun to perceive inflation at a faster pace than the actual rise, warning that they would become pessimistic with wage growth not keeping pace.
"Pressure could build further on the BOJ if more politicians start to take issue with accelerating inflation in the run-up to the House of Councillors election (in July)," Kumano said.