Page last updated at 10:23 GMT, Thursday, 10 July 2008 11:23 UK

Japan's wholesale inflation rises

grain
High grain and oil prices have fuelled wholesale inflation

Japanese wholesale prices reached a 27-year high in June, spurred by high crude oil prices and the rising cost of raw materials such as steel and grain.

Prices rose 0.8% from May and grew 5.6% year-on-year, marking the biggest annual hike since February 1981.

Despite rising prices, the central bank is wary of increasing interest rates and sparking an economic slowdown.

The Bank of Japan policy board is due to meet next week to make a decision on interest rates.

However analysts said they expected the rate to be held at 0.5%

Deepening gloom

"We still think the recent rise in price data are unlikely to prompt the bank of Japan to raise rates," said economist Junko Nishioka at RBS Securities.

"The Bank of Japan is focused more on the negative impact of the price rises on demand, rather than the possibility of continuous inflation pressure," he said.

The latest data has deepened the gloom surrounding many of the country's firms which have seen their profit margins hit hard in recent times.

Last week a quarterly survey by the Bank of Japan showed that in June, Japanese manufacturers were at their least confident in five years.

Several companies have found it difficult to pass on higher prices as Japanese consumers worry about higher fuel and food prices and keep a careful eye on spending.

Japan is the world's second-largest economy after the US.




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