Japanese wholesale inflation rate up

Producer price inflation has increased by 4.7 percent in May from 3.9 percent in the last month as Japan is experiencing an increase in wholesale prices at their fastest rate in 27 years. This signals the end of the economic expansion that has continued from strength-to-strength since the war.

Profits have fallen by 17.5 percent in the first quarter from last year, which is the sharpest decline since the 2001 recession.

The rise in the price of raw materials has caused many companies such as Nippon Oil Corp. and Yamazaki Baking Co. to increase their prices, as a result consumer prices excluding fresh food increased by 0.9 percent last month.

The Bank of Japan said that the current-account surplus has reduced by 30 percent in April as a result of oil costs and the cost of imports.

The Bank of Japan is not likely to change interest rates similar to the BoE nor is the Federal Reserve, due to inflationary pressures which are not at the same extent as in Europe and the US.

The BoJ Governor, Masaaki Shirakawa, will make a decision after a two-day policy meeting which concludes today, although analysts are predicting that the central bank will keep interest rates steady.

Even though there is turbulence in the economy, the bond market has reacted calmly and has revised economic growth data for the first quarter.

Story link: Japanese wholesale inflation rate up