Japanese wholesale prices down record 6.6% in June on year

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TOKYO, July 10 Kyodo -
Japanese wholesale prices dropped a record 6.6 percent in June from a year
earlier on lower energy and material prices and weakening domestic demand, the
Bank of Japan said Friday, providing fresh evidence of increasing deflationary
pressure in the recession-hit country.
The result marked the largest fall since comparable data became available in
1960, outpacing the average market forecast of a 6.3 percent fall in a Kyodo
News survey.
The prices, gauged by the central bank's corporate goods price index, stood at
102.6 against the 2005-year base of 100, the BOJ said in a preliminary report.
The headline reading fell for the sixth straight month, with the pace of the
fall accelerating each month.
With crude oil prices down dramatically from record highs a year earlier,
energy prices fell sharply in June and nonferrous metal and steel prices also
came down. Prices of electronics products also dropped amid weakening domestic
demand.
''The wholesale prices are falling not only in a reaction from record high
energy prices last year but also reflecting weakening domestic demand. This is
a bad price fall,'' said Hideo Kumano, chief economist at Dai-ichi Life
Research Institute.
Kumano said that increasing deflationary pressure is certainly not good news
for Japan which is trying to pull out of its worst postwar recession as
deflation may hamper growth by causing consumers postpone purchases and hurt
corporate earnings. The wholesale prices could fall further in coming months,
he added.
Prices of petroleum and coal products, including gasoline and kerosene, plunged
41.7 percent. Prices of nonferrous metal dropped 29.1 percent and those of iron
and steel fell 9.3 percent.
Information and communication equipment prices fell 5.2 percent and electronic
component and device prices dropped 3.6 percent.
The BOJ's policy board members predicted in April that Japanese wholesale
prices would fall 7.5 percent in fiscal 2009 ending next March, and 1.8 percent
in the following year. They are set to review their forecasts for price trends,
together with economic growth, at the next two-day policy meeting starting on
Tuesday.
The BOJ's index measures fluctuations in the prices of products traded between
companies, including raw and intermediate materials like crude oil, iron scrap,
and machinery parts, and the gauge tends to move more sharply than consumer
prices.
Japan's consumer price index, excluding volatile fresh food prices, fell a
record 1.1 percent in May, and the corporate services price index dropped a
record 3.0 percent the same month, also showcasing growing deflationary
pressure in Japan.
On a month-on-month basis, wholesale prices declined 0.3 percent from May for
the 10th straight month of decline, the longest losing streak since January
2002, until which time prices fell for 11 months in a row.
Import prices were down a record 26.5 percent year-on-year in terms of contract
currencies and fell 32.2 percent in yen terms.
Export prices fell 5.1 percent on a contract currency basis and lost 12.8
percent in terms of the Japanese yen.
==Kyodo
2009-07-10 21:37:03