BOJ holds regional outlook as cost pass-through accelerates
Japan’s central bank kept its regional outlook steady, but companies warned of faster price rises linked to Middle East-driven cost pressures.
- The Bank of Japan (BOJ) has maintained its economic assessment for all nine of Japan's regions, describing them as continuing to recover moderately.
- Companies are increasingly passing on higher material costs, which are linked to turmoil in the Middle East, through price hikes on food, daily goods, and other products.
- The pace of this cost pass-through is accelerating, with a BOJ branch manager noting that costs are being passed on faster than during the price surge that followed Russia's invasion of Ukraine.
Cost pressures linked to the Middle East are moving more quickly through parts of Japan’s corporate sector, even as the Bank of Japan kept its assessment of all nine regional economies unchanged.
The view was set out in the central bank’s quarterly regional report, which was approved at a meeting of BOJ branch managers at its headquarters in Tokyo on Thursday (July 9).
Several branch chiefs reported that food and daily goods companies were preparing to raise prices from this summer or later, citing higher material costs caused by turmoil in the Middle East.
The pressure is also spreading through business-to-business transactions.
Many companies in material-related sectors told the BOJ that moves to pass higher costs on through product prices are gaining pace.
One supermarket in Yokohama, the capital of Kanagawa Prefecture south of Tokyo, said it would lift prices on some items to absorb higher packaging material costs stemming from Middle East tensions.
He added that products closer to consumers would probably face a certain level of price increases as well.
Branch managers, however, judged that the risk of sharp falls in exports and production had eased, as companies had made progress in securing supplies from places other than the Middle East.
In Osaka, an electric machinery maker reported strong performance from artificial intelligence-related demand, saying it had repeatedly revised up its earnings forecast.
The BOJ described the nine regional economies as either “recovering moderately”, “on a moderate recovery trend”, “picking up” or “picking up moderately”.
For Kanto-Koshinetsu, the eastern-to-central region whose economy “has been recovering moderately”, the report added a reference to “the impact of the situation in the Middle East”.
[Copyright The Jiji Press, Ltd.]
