By Leika Kihara
TOKYO, Jan 15 (Reuters) - Japan's wholesale inflation slowed in the year to December on sliding fuel costs, data showed on Thursday, a sign falling crude oil prices were offering some relief to companies facing rising labour and other raw material costs.
But the yen-based import prices flattened after falling year-on-year for 10 straight months, suggesting the currency's renewed declines could keep inflation elevated and heighten the chance of a near-term interest rate hike.
"We expect
wholesale inflation to slow" due to moderating price rises for agricultural goods and the effect of government subsidies to curb utility bills, said Masato Koike, a senior economist at Sompo Institute Plus.
"That should put downward pressure on consumer inflation with some lag. But the yen has recently weakened at a rapid pace which, if it persists, could push up import prices," he said.
The corporate goods price index (CGPI), which measures the prices companies charge each other for their goods and services, rose 2.4% in December from a year earlier, Bank of Japan (BOJ) data showed, matching a median market forecast.
It slowed from a 2.7% annual increase in November.
An index measuring yen-based import prices was unchanged from year-before levels in December after a revised 1.7% drop in November, the data showed, highlighting renewed upward price pressure from the weak yen.
The data will be among factors the BOJ scrutinises in its quarterly review of its growth and inflation forecasts at the next policy meeting on January 22-23.
The BOJ raised its policy rate to a 30-year high of 0.75% from 0.5% in December, taking another landmark step in ending decades of huge monetary support and near-zero borrowing costs.
Despite the move, Japan's real borrowing costs remain deeply negative with consumer inflation exceeding the BOJ's 2% target for nearly four years.
Some analysts blame the slow pace of rate hikes as among factors behind the weak yen, which gives exports a boost but hurts households and retailers by pushing up the cost of raw material imports.
The yen fell to an 18-month low against the dollar earlier this week, drawing verbal warnings from Japanese policymakers fretting over the inflationary impact of the move.
BOJ Governor Kazuo Ueda has signalled the bank's readiness to continue raising interest rates, but has left few clues on the pace and timing of future increases in borrowing costs.
(Reporting by Leika Kihara; Editing by Christopher Cushing and Himani Sarkar)
