TOKYO: Japan’s wholesale prices dropped 2.1 percent in May from a year earlier, down for the second straight month, the Bank of Japan said Wednesday, signaling that the country is still struggling to conquer nearly two decades of deflation.
The index of corporate goods prices stood at 103.9 against the 2010 base of 100, the central bank said in a preliminary report.
Prices for petroleum and coal products, which greatly depend on energy imports, plummeted 21.1 percent, and those for chemical and related products, typically subject to oil prices, also slid 5.9 percent, the BOJ said.
Export prices rose 4.8 percent, but import prices plunged 8.3 percent, both in yen terms. Japan depends on imports for more than 90 percent of its energy needs.
Excluding the impact of the 3-percentage-point consumption tax hike to 8 percent in April last year, the index fell 2.0 percent to 101.0, down for the seventh consecutive month.
The latest results indicate that prices are unlikely to turn into an upward trend soon in Japan, a prospect that could make it more difficult for the BOJ to achieve its 2 percent inflation target in the near future, some analysts said.
When wholesale prices fall, consumer prices would also decrease as companies might start to sell their goods and services at lower prices with terms of trade improving.
In April, Japan’s core consumer price index, eliminating volatile fresh food prices, rose 0.3 percent from the previous year for the 23rd straight monthly increase, the government said late last month.
But the index was flat during the same month, excluding the effects of last year’s consumption tax hike, the Ministry of Internal Affairs and Communications said.
A BOJ official suggested that wholesale and consumer prices are both expected to bottom out in Japan, saying the yen’s sharp depreciation may drive up import costs, possibly prompting some firms to pass on rising material costs to products. The official added global crude oil prices have recently shown signs of rebounding.
