Japan's domestic Corporate Goods Price Index (CGPI) hit its highest level since May 2023 in April, driven by continued rises in global crude oil prices and the depreciation of the yen, with experts warning that the country faces mounting risks of stagflation — a toxic mix of intensifying imported inflation and slowing economic growth.
According to data released by the Bank of Japan on May 15, the CGPI rose 4.9 percent year-on-year in April to 132.8, significantly exceeding market expectations of a 3 percent increase and sharply accelerating from the 2.9 percent rise recorded in March. Analysts point out that the worsening situation in the Middle East has driven up international oil prices, while tight naphtha supplies have led to substantial increases in the prices of petroleum and chemical products. At the same time, the yen-based import price index jumped 17.5 percent year-on-year in April, reflecting continued yen depreciation combined with rising energy prices, further intensifying imported inflationary pressures.
Xiang Haoyu, a specially appointed research fellow at the China Institute of International Studies (CIIS), said that Japan's current bout of inflation exhibits dual characteristics of both imported inflation and currency-driven inflation, and is likely to be more persistent. "Japan's current inflation is driven jointly by geopolitical conflicts and the continued depreciation of the yen," he noted. He added that inflation has spread across the entire upstream industrial chain, including chemicals and nonferrous metals, which could exert a more pronounced squeeze on manufacturing profits. With the Bank of Japan already in a rate-hiking cycle, policy space has narrowed, while the risk of rising interest rates for both companies and households has increased, leaving the economy entangled between recession risks and inflationary pressures.
The Corporate Goods Price Index measures price movements of goods traded between companies and is regarded as a leading indicator of consumer prices. A senior official at the Bank of Japan said that rising crude oil prices are gradually affecting a wide range of products and are expected to have a growing impact going forward.
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