Wholesale prices in Japan rose into positive territory in March from a year earlier, the first such rise since July 2000, boosted by higher commodity prices on the back of strong global demand and a surge in rice prices. But while a recovery in wholesale prices reflects Japan's growing economic recovery, analysts and policymakers say it will take time for gains in wholesale prices to filter through to consumer prices, and it could have an adverse impact on corporate profits. Japan's domestic corporate goods price index (CGPI) rose 0.2 percent in March on a year-on-year basis, while also gaining 0.2 percent from the previous month, Bank of Japan (BOJ) data showed on Tuesday. "It was widely expected that prices would turn positive so it's not a surprise," said Tetsuya Miura, a bond strategist at Shinko Securities. "And it is too early to say whether it's all a good thing, as factors such as exchange rates may put pressure on corporate profits despite a rise in prices."
Sectors where prices rose sharply included iron and steel, nonferrous metals and agricultural products. "Higher commodity prices spurred by robust global economic growth contributed to gains," a BOJ official said. The central bank said in a monthly report last week that it expected CGPI to remain firm. "It may be a sign of a turning point," Chief Cabinet Secretary Yasuo Fukuda told a news conference. "But we need to analyse the factors that affected the CGPI, such as exchange rates, oil prices and raw material costs, to determine whether it's a good thing or a bad thing," he said. BOJ Governor Toshihiko Fukui indicated last Friday that he saw little chance for inflationary pressures to build, saying last week that it would take more time for price rises to filter through to the economy, compared with previous recoveries. CGPI data showed that while wholesale prices for raw and intermediate materials were recovering, prices for final goods continued to decline. Data also showed the CGPI fell 0.5 percent for the year that ended in March, down for the sixth straight year, compared with a decline of 1.6 percent in fiscal 2002/03.///