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TOKYO - Japan's wholesale inflation accelerated in September but prices of imported goods slid due to the yen's rebound, data showed on Thursday, suggesting that price pressures from raw material costs were subsiding.
The decline in import costs will likely shift the Bank of Japan's attention to whether a more demand-driven rise in inflation takes hold in the world's fourth-largest economy.
The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 2.8% in September from a year earlier, BOJ data showed, exceeding a median market forecast for a 2.3% gain.
It accelerated from a 2.6% increase in August due largely to a surge in the price of rice, which is in short supply due to a combination of bad weather and increasing demand from overseas tourists.
The yen-based import price index fell 2.6% year-on-year in September after a 2.5% gain in August, marking the first decline in eight months, the data showed.
The slump was driven by the resumption of government subsidies aimed at curbing utility bills, and the yen's rebound that made the cost of importing commodities and raw material cheaper.
"Receding expectations of big rate cuts by the U.S. Federal Reserve is putting a floor on the dollar/yen and escalating tension in the Middle East are pushing up crude oil prices," which will both underpin domestic inflation, said Takeshi Minami, chief economist at Norinchukin Research Institute.
"Japan's real interest rates remain in negative territory. If higher wages push up consumption, the BOJ will likely consider raising rates again," he said, adding that another hike in December cannot be ruled out.
The BOJ ended negative interest rates in March and raised short-term borrowing costs to 0.25% on the view Japan was making progress towards durably achieving its 2% inflation target.
Japan's core consumer inflation hit 2.8% in August, exceeding the BOJ's 2% target for well over two years, keeping alive expectations for further interest rate hikes.
The BOJ has said inflation must be driven more by higher wages and domestic demand, rather than via rising raw material costs, to become sustainable and meet the prerequisite for further rate increases.
(Reporting by Leika Kihara; Editing by Christian Schmollinger and Shri Navaratnam)