TOKYO, Nov. 11 (Xinhua) -- Japan's wholesale prices dropped 2.7 percent in October from a year earlier, as the nation continues to struggle with deflationary pressure, the Bank of Japan said in a preliminary report on Friday.
The index of corporate goods prices stood at 98.7 against the 2010 base of 100, the Bank of Japan said. October's retreat is a marginal improvement on September's 3.2 percent slide, but the latest reading will be worrisome for the central bank, who has already delayed its 2 percent inflation target goal numerous times and unrolled an arsenal of ineffective monetary polices, as it has come in worse than the median market forecast for a 2.6 percent retreat.
The Domestic Corporate Goods Price Index (CGPI) measures prices for goods purchased by Japanese corporations and as prices for import materials and the overall cost of manufacturing changes, Japanese companies adjust their retail prices accordingly.
Producer prices, hence, often provide a clear gauge of where consumer inflation will be headed in the coming months as price changes are passed on from wholesalers to final buyers.
"Regarding the latest reading, it is easy to infer that consumer inflation will remain in deflationary territory for the foreseeable future," noted one local market analyst.
The CGPI in Japan, on a monthly, quarterly and annual basis, is comprehensively tracked as these supply-side price pressures and increases in the index often precede upward movement in the CPI.
However, if a decrease in the CGPI is followed by a decrease in the CPI, concerns about deflation may prompt the Bank of Japan to unroll more stimulus measures, including further lowering its interest rate, if the situation is reversed the opposite will happen.
The headline numbers are the percentage change in the index month or month and annually.
