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Oil Costs Help Propel Japan's Wholesale Prices

April 13, 2006|From Reuters

TOKYO — Japan's wholesale prices rose in March from a year earlier as high oil and raw material costs were passed on to prices of final goods, providing further evidence that the economy is emerging from years of debilitating price deflation.

The domestic corporate goods price index, which tracks trends in wholesale prices of goods, rose 2.7% in March from the same month a year earlier, Bank of Japan data showed Thursday. That was slightly below a consensus forecast of a 2.8% rise.

Revised data for February showed the index rose 3% from a year ago, the highest gain since a 3.1% increase in January 1990.

Compared with a month earlier, the index was flat in March.

"Commodity prices other than oil have risen quite a bit, and that seems to be continuing. The impact on final goods prices is not entirely clear yet, and a lot depends on that," said Chotaro Morita, chief bond strategist at Deutsche Securities.

High oil and raw material prices have been pushing up Japan's wholesale prices, which companies -- encouraged by a solid economic recovery -- have gradually passed on to consumers over the last several months.

Such a move has underpinned modest rises in consumer prices, which prompted the Bank of Japan to scrap its 5-year-old ultra-easy credit policy last month. Some traders speculate that the Bank of Japan could start raising interest rates as early as July.

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