MNI POLICY: BOJ Sees Costs Increasingly Pushed To Consumers

Bank of Japan officials are increasingly confident that cost increases are being passed on to consumers, as shown in recent Final Demand-Intermediate Demand (FD-ID) price index results, potentially strengthening the case for a rate hike on May 1, MNI understands.

The BOJ publishes the FD-ID series about once a month. It is split into four stages of intermediate and then final demand and consists of over 100 component indexes. 

The most recent results, which could feature within upcoming BOJ publications, showed downstream prices in stages 3-4 and final demand were rising steadily, despite less pressure from energy or import prices, suggesting upstream producers are passing on more costs. 

The results also suggested the wage-price virtuous cycle has also steadied and is being less influenced by import prices.

Previously, Stage 1 had a stronger impact on downstream prices, mainly due to rising international commodity prices and a weaker yen, which would then drive a moderate increase to stages 3-4 and final demand, with the pace of rises slowing the further downstream. 

While the results support an additional hike at the May 1 meeting, the Board will also closely monitor global economic conditions and U.S. trade policies before deciding.

Officials also expect service price increases to accelerate from April, as businesses adjust retail prices to offset high labour costs.