Japan’s Wholesale Inflation Steady at 3.8% in December

By Leika Kihara

TOKYO (Reuters) – Japan’s annual wholesale inflation held steady at 3.8% in December, driven by high food costs, indicating persistent price pressures that may prompt the central bank to raise interest rates next week.

This data follows Bank of Japan Governor Kazuo Ueda’s comments on Wednesday, stating the bank will discuss rate hikes at the Jan. 23-24 meeting, anticipating increased borrowing costs unless market shocks arise after U.S. President-elect Donald Trump’s inauguration on Monday.

The year-on-year rise in the corporate goods price index (CGPI), which gauges prices companies charge each other for goods and services, matched market forecasts and followed a similar 3.8% annual increase in November.

The rise was largely due to a 31.8% surge in agricultural goods costs, particularly rice. Additionally, fuel costs rose as government subsidies to control utility and gasoline prices were phased out.

An index measuring yen-based import prices rose 1.0% in December compared to the previous year, indicating that the yen’s weakness continued to inflate costs for companies.

“Wholesale inflation remains under strong upward pressure,” noted Takeshi Minami, chief economist at Norinchukin Research Institute. He added that Trump’s policies on tariffs, immigration, and energy could impact Japan’s monetary policy, particularly through exchange-rate fluctuations.

The wholesale price data, closely monitored as a leading indicator of consumer price trends, will be key in the BOJ’s decision-making process regarding interest rate adjustments next week.