By Leika Kihara
TOKYO (Reuters) - Japan's wholesale prices fell at a smaller annual pace in July than in the previous month as global and domestic demand rebounded, a sign the economy was gradually emerging from the damage wrought by the coronavirus pandemic.
But analysts expect any pick-up in prices to remain shallow as fears of a huge second wave of infections weigh on business and consumer sentiment.
The corporate goods price index (CGPI), which measures the price companies charge each other for their goods, fell 0.9% in July from a year earlier, Bank of Japan data showed on Thursday, less than a median market forecast for a 1.1% drop.
The decline was less steeper than a 1.6% fall in June and the smallest downturn since March, when it was off 0.5%.
Declines in gasoline, chemical and nonferrous metal prices eased in July, reflecting a pick-up in demand as China and many advanced economies lifted lockdowns, the data showed.
Agricultural goods prices also fell at a much slower pace than in June, as demand for beef and other food products recovered after Japan ended lockdown measures in late May.
"As economies re-open, downward pressure on prices from the pandemic appears to be easing," Ichiro Muto, head of the BOJ's price statistics division, told reporters.
"But there's no change to the broader picture, in which the pandemic is weighing heavily on wholesale prices," he said.
Japan's economy slipped into recession and is expected to have suffered an annualised contraction of 27.2% in April-June, as the coronavirus crisis crushed business and consumer spending.
While economic activity has re-opened, a recent surge in infection numbers is clouding the outlook for the recovery.