A Democratic Party's lawmaker Satsuki Eda, center, reacts as the upper house of Japan's Parliament elected him as its president in Tokyo Tuesday, Aug. 7, 2007. (AP)
TOKYO - Japan's wholesale inflation remained near a 27-year high in August, the government said Wednesday, as the soaring costs of energy and raw materials continued to pressure businesses.
The index for domestic corporate goods prices rose 7.2 percent from a year ago, the Bank of Japan said.
The result was largely in line with market forecasts and fell just below a revised 7.3 percent increase in July, which marked the steepest climb since an 8.1 percent gain in January 1981. Then, as now, high oil prices drove inflation.
Despite higher costs, companies have yet to fully pass those increases on to customers. The data suggest that consumer inflation may be headed up over the next few months, threatening to further sap demand in an already slowing economy.
The core consumer price index, excluding fresh food prices, increased 2.4 percent in July.
With oil dropping toward $100 a barrel, wholesale prices are beginning to soften, said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo.
"They're high, but it looks like this is the peak," he said.
The consumer price index, meanwhile, probably won't peak until later this year, Shiraishi added.
Behind the corporate goods index were surging prices of petroleum and coal products, which rose 43.3 percent after a revised 44.3 percent increase in July, according to the data. Iron and steel product prices jumped 28.6 percent after climbing a revised 27.0 percent in July.
The corporate goods price index measures price developments of goods bought and sold by companies. The central bank uses 2005 as the base year for the index.
In data released separately Wednesday, Japan's current account surplus — the widest barometer of its trade with the world — fell 17.3 percent in July from a year earlier to 1.53 trillion yen ($14.3 billion), as a higher important bill dampened a rebound in exports.
"Looking ahead, while import values likely will decrease due to the slide in commodity prices, a growth in export values are expected to remain sluggish, given the recent slowdown in global economy," said Masamachi Adachi, senior economist at JP Morgan Securities in Tokyo, in a research note.
The world's No. 2 economy teeters on the brink of recession against the backdrop of higher energy and materials prices, sluggish exports and the global credit crunch.
Initial government estimates showed that second-quarter gross domestic product contracted at a 2.4 annual pace. But revised GDP figures are due out Friday, and economists predict a sharper downturn than originally reported.