TOKYO (Reuters) - Japan’s wholesale prices fell at the fastest annual pace in nearly four years in May, data showed on Wednesday, as the coronavirus pandemic hit business activity and weighed on global demand for commodities.
While a rebound in oil costs may put a floor on prices in coming months, wholesale inflation will remain under pressure from the damage wrought by the pandemic, analysts say.
“The outlook for the global economy is improving somewhat and that’s leading to a rebound in commodities costs, which could underpin wholesale prices ahead,” Ichiro Muto, head of the Bank of Japan’s price statistics division, told reporters.
“But the scars of the pandemic will remain for some time, despite the lifting of nationwide lockdown measures,” he said.
The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, slumped 2.7% in May from a year earlier, worse than a median market forecast for a 2.4% drop, BOJ data showed on Wednesday.
It was the biggest decline since October 2016 and followed a 2.4% drop in April, with the drop blamed largely on sluggish oil costs, the data showed.
Prices of steel goods continued to slump as the pandemic led to suspensions of construction work and manufacturing plants.
Some food products, such as eggs, also saw prices as cake and pastry shops were forced to close due to lockdown measures, the data showed.
Japan’s economy slipped into recession and is set to suffer a more than 20% annualised contraction in the current quarter, after the government in April urged citizens to stay home and businesses to close.
Although the state of emergency was lifted in late May, analysts expect the economy to recover only moderately in the face of the pandemic’s sweeping global impact.
Reporting by Leika Kihara; Editing by Sam Holmes