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Japan's November wholesale prices slump, auto demand rebound offers hope

TOKYO (Reuters) - Japanese wholesale prices in November fell 2.2% from a year earlier, marking the biggest drop in six months in a sign the lingering pain from the coronavirus pandemic is keeping the economy under deflationary pressure.

But some goods saw prices rebound due to a pick-up in global automobile demand, suggesting a gradual recovery in trade was underpinning the export-reliant economy.

The fall in the corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, matched a median market forecast.

It followed a 2.1% drop in October and marked the biggest year-on-year fall since a 2.8% decrease in May, Bank of Japan data showed on Thursday.

While slumping oil costs continued to weigh on overall wholesale prices, machinery, nonferrous metals and other goods used for auto production saw prices pick up, the data showed.

Wholesale prices are considered among leading indicators of the consumer price index, which is closely watched as a key gauge for the BOJ in deciding monetary policy.

After suffering its worst postwar contraction in the second quarter, Japan’s economy rebounded in July-September helped by improved exports and consumption. But many analysts expect a third wave of COVID-19 infections to keep any recovery modest.

Reporting by Leika Kihara; Editing by Jacqueline Wong

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