Japanese Corporate Goods Price Index Hits Record High for Two Consecutive Months Due to Rising Oil Prices and Yen Depreciation

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As international oil prices rise due to Russia's invasion of Ukraine and a rapid depreciation of the yen occurs, Japan's corporate goods price index has set a record high for two consecutive months.

According to Japan's Nihon Keizai Shimbun and others, the Bank of Japan (BOJ) announced on the 12th that the June corporate goods price index in Japan (2020 average = 100, preliminary figure) was 113.8, marking a record high following May. Compared to the same month last year, it rose by 9.2%, the highest level since December 1980 (10.4%) during the oil shock.

The corporate goods price index has increased by more than 5% for 12 consecutive months. The continuous rise in the corporate goods price index is interpreted as being due to rising energy prices and the weak yen.

First, due to the Ukraine war, energy prices such as crude oil have increased, raising prices of petroleum products like gasoline as well as electricity and city gas. Among the 515 items announced by the BOJ last month, 409 items, accounting for 79.4%, increased. By item, petroleum and coal products (22.2%), chemical products (12.5%), and electricity, city gas, and water supply (28.2%) pushed the index upward.

Unlike the United States and others, Japan has maintained a large-scale monetary easing policy, which has also fueled the rise in the corporate goods price index by causing the yen's value to fall. Since the beginning of this month, the yen-dollar exchange rate has reached 137 yen per dollar, soaring to the highest level in 24 years since the second half of 1998.

Nihon Keizai stated, "As Russia's invasion of Ukraine is prolonged, energy prices are expected to remain high for the time being," and added, "Although the BOJ has reached its 2% inflation target, it plans to temporarily maintain the current monetary easing policy."