Japan’s wholesale price drop eases in June, outlook dims on frail demand

June had seen Japan’s wholesale prices dropping slower than May’s historic decline. This followed as commodity costs advanced and some of the virus-driven deflationary pressure eased on a rebound monitored in Chinese demand.

The corporate goods price index (CGPI) recorded a 1.6% drop in June from a year earlier, data from the Bank of Japan showed on Friday. This came smaller than the median market forecast of a 1.9% decline. It also placed lower than the 2.8% drop in May, the sharpest record the index had tallied since 2016.

However, the number of CGPI components that declined surpassed those that advanced in June. All in all, the index tallied a total of 124 struggling components from May’s tally of 92, suggesting that domestic demand is frail.

“The data shows that weakness in domestic demand caused by the pandemic is weighing on prices,” Ichiro Muto, head of the BOJ’s price statistics division, said.