Japan’s wholesale prices rose 4.9% year-on-year in April, far above the 3.0% forecast, as Iran war-driven oil costs pushed import prices up 17.5% and naphtha surged 83.2% month-on-month.

Summary:

• Japan’s corporate goods price index rose 4.9% year-on-year in April, well above the 3.0% median market forecast and sharply up from a revised 2.9% in March, marking the biggest annual rise since May 2023
• The yen-based import price index surged 17.5% year-on-year in April, the fastest pace since December 2022, after a revised 8.0% gain the prior month
• Naphtha prices rose 83.2% month-on-month and 79.4% year-on-year in April, while chemical goods prices climbed 9.2% year-on-year, the fastest since September 2022
• A BOJ official attributed the broad-based price rises to uncertainty surrounding the Middle East conflict and the effective closure of the Strait of Hormuz
• The data is expected to increase pressure on the BOJ to raise interest rates at its next policy meeting in June

Japan’s wholesale inflation surged well beyond expectations in April, with data released by the Bank of Japan pointing to rapidly intensifying cost pressures driven by the ongoing Middle East conflict and the near-closure of the Strait of Hormuz to commercial shipping.

The corporate goods price index, which tracks the prices companies charge each other for goods and services, rose 4.9% year-on-year in April. That was sharply higher than the median market forecast of 3.0% and a significant acceleration from the revised 2.9% recorded in March. It was also the largest annual increase since May 2023, underscoring how quickly the energy shock is transmitting through Japan’s supply chain.

Import prices told an even starker story. The yen-based import price index climbed 17.5% year-on-year in April, the fastest pace since December 2022, after a revised 8.0% gain the previous month. A BOJ official attributed the broad-based price increases to uncertainty generated by the Middle East conflict and the effective closure of the Strait of Hormuz, identifying oil and chemical products as the primary drivers.

The petrochemical segment saw particularly severe moves. Naphtha, a key feedstock for plastics and chemical manufacturing, rose 83.2% month-on-month and 79.4% year-on-year in April. Chemical goods prices as a whole climbed 9.2% year-on-year, the fastest rate of increase since September 2022. The scale of those moves suggests the inflation impulse from the energy shock is far from fully absorbed, with further passthrough to downstream industrial and consumer prices likely in the months ahead.

The data arrives at a sensitive moment for the BOJ, which had already been on a gradual tightening path before the latest energy shock complicated the global inflation picture. The April print is expected to sharpen debate within the central bank ahead of its June policy meeting, with markets likely to bring forward expectations for the next rate hike. A wholesale inflation reading nearly double the consensus forecast gives BOJ policymakers limited room to look through the data as transitory, particularly given the structural nature of the supply disruption driving it.

ps. Takaichi has a call scheduled with Trump today.

—

A wholesale inflation print nearly double market expectations significantly raises the probability of a BOJ rate hike at the June meeting, which would have broad implications for yen-denominated assets and global carry trades funded in Japanese yen. The 83.2% month-on-month surge in naphtha prices signals acute stress in petrochemical supply chains that will take time to pass through to consumer and industrial prices. With import prices rising at the fastest pace since late 2022, the BOJ faces a narrowing window to maintain its gradual tightening path without being forced into a more aggressive response. Energy and chemical sector cost pressures of this magnitude typically take several months to fully transmit through manufacturing supply chains.