The domestic corporate goods price index rose 7.2% year on year to 135.8 in July. Surging raw-material prices and higher energy costs have spread across a broad range of items, prompting markets to factor in the possibility of an early Bank of Japan rate hike.
The preliminary domestic corporate goods price index reading for July was 135.8, up 7.2% year on year. Although the rate of increase edged down from June’s revised 7.3%, it remained above 7% for the second consecutive month.
Prices rose for 434 of the 515 items covered, as the broad-based pass-through of higher costs continued. Factors behind the rise in raw-material costs included heightened tensions in the Middle East, the yen’s depreciation and expanding global demand.
By item, nonferrous metals rose 40.6% year on year on soaring copper prices, while petroleum and coal products increased 17.5% amid higher crude oil prices. Information and communications equipment rose 17.3% on expanding AI demand, and chemicals increased 12.9% amid uncertainty over naphtha supply and demand. Higher electricity and city gas charges also pushed up the overall index.
Meanwhile, the yen-based import price index rose sharply to 199.7 in July, up 29.1% year on year. Yen depreciation has substantially increased overseas procurement costs, and its impact continues to be felt in the upstream portion of domestic supply chains.
Persistently high prices are increasing the risk of further pass-through to consumer prices, and the Bank of Japan is monitoring the extent to which surging raw-material costs are reflected in product prices. Depending on developments, expectations of additional rate hikes may strengthen.