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Bank of Japan economists will analyze how rising raw materials affect corporate profits ahead of the July meeting when policymakers will update their medium-term economic and price outlook, MNI understands.

International commodity prices, such as for nonferrous metals, are rising in the wake of increasing demand and are worsening the terms of trade for Japan.

Bank officials also see a weak yen as a troublesome factor in worsening the terms of trade.

Higher import prices will squeeze corporate profits and prompt firms to raise their retail prices, but it is difficult for businesses to raise retail prices now as consumer spending has not recovered to normal levels.

Despite high raw material prices, Japan's economy will not deviate from a recovery path immediately, the BOJ views.

Crude oil prices are higher than last year but they are stable, easing the BOJ's imminent concern over the weaker economy.

However, bank officials continue to carefully examine the impact of high raw materials on a virtuous cycle from profits to spending in the corporate sector, and they will incorporate their analysis into the quarterly Outlook Report in July.