It's as if a new oil shock had arrived. Prices of crude oil futures, which once hit $70 a barrel, have not come down enough, still hovering above $60 a barrel -- more than three times the prevailing level of three years ago.
The high oil prices are likely to cast a cloud over the Japanese economy. They are already affecting the prices of petroleum-based products as seen, for example, in the steep rise of gasoline prices. But their influence on producer and consumer price indexes appears limited so far. Businesses must reckon with factors other than rising energy costs.
Since overall deflationary pressure is still strong, it is difficult for enterprises to pass production-cost increases through to retail prices in a competitive environment without squeezing profits and exerting pressure on business operations.