It’s not just the U.S.: Inflation alarm bells are also ringing in Japan and—most worryingly—in China

November 11, 2021, 9:51 AM UTC

While the U.S. battles its largest jump in consumer inflation in decades, countries in Asia this week reported that they are dealing with inflationary pressures of their own.

On Thursday, Japan’s central bank reported that its wholesale inflation reached its highest level in 40 years, as Japan’s corporate goods price index (CGPI)—the average prices that companies charge one another for goods and services—spiked 8% in October from the same month a year ago.

A steep increase in commodity prices helped drive the inflation. The price of lumber went up by 57% from one year ago for Japanese producers, while the price of coal and petroleum products rose by 44.5%.

Japanese firms have so far largely absorbed the rising costs. They’re afraid that passing the increase along to consumers via higher prices will sap household spending, according to a Reuters poll of Japanese companies. Japan reported in September that consumer prices rose by 0.1%, the first uptick in 18 months.  

China, too, reported decades-high producer inflation numbers this week.

On Wednesday, China’s National Bureau of Statistics (NBS) reported that its producer price index rose by 13.5% in October from one year ago, the largest increase in 26 years. The index measures the prices that wholesalers pay to producers for materials when the goods leave the so-called factory gate, before additional costs like transport or distribution are added.

The figure beat analyst expectations of a 12.5% rise and were driven by increases in the prices of coal, oil, and steel, China economists Larry Hu and Xinyu Ji from Macquarie Group wrote in a note to Fortune.

Similar to Japan, China’s sharp jump in wholesale prices has yet to lead to significant price increases for consumers, according to Wednesday’s data. China’s NBS said consumer inflation rose by 1.5% in October compared to a year ago, up from a 0.7% rise in September.

While Chinese consumers are unlikely to immediately feel the inflationary pressures, rising factory gate prices may trigger anxiety for the rest of the world. China is the world’s largest exporter of goods and a critical link in global supply chains. Rising prices at Chinese factories could fuel “upward pressure on global inflation,” Ken Cheung, chief Asian foreign exchange strategist for Mizuho Bank, told CNN.

That’s bad news for places that buy Chinese products like the U.S., where the cost of goods is already skyrocketing. On Wednesday, the U.S. Labor Department announced that consumer prices rose by 6.2% from 2020, the fastest 12-month surge in 31 years.

Still, rising cost pressures at Chinese factories may ease in coming months.

Hu and Ji note that Chinese factory gate inflation may have peaked last month amid an energy crunch in China and booming costs for commodities like coal. In mid-October, Beijing intervened to ramp up coal production and force miners to cut prices. Coal prices peaked at roughly $400 per ton on Oct. 20 and have since fallen to roughly $150 per ton, according to Macquarie.

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