Japan's wholesale prices collapsed in August, contracting -0.1% versus a revised 2.2% in the preceding month. The result marks the first monthly decline in nearly a year. The drop comes courtesy of the rapid selloff in crude oil and other key commodities. To date, crude has fallen 31% since the peak at $147/barrel in mid-July. The release bolsters the case of the Bank of Japan, where policy makers have opted to keep borrowing costs at 0.50% even as headline inflation soared. Bank officials argued that commodity-led jumps in the price level had not produced dreaded second-round effects (like wage inflation) and so the focus of policy had to remain on economic growth. Indeed, the world's second-largest economy is dangerously close to an official recession having seen GDP growth wither -0.6% in the second quarter. Bond yield forecasts call for the Bank of Japan to keep borrowing costs unchanged through most of next year, with a 25 basis point hike coming in the fourth quarter.
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Japanese Producer Prices Collapse in August on Cheaper Oil
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