|Month over Month||-0.1%||-0.2%||-0.2%|
|Year over Year||-2.9%||-3.0%||-2.4%|
The decline in producer prices worsened in July not helping Bank of Japan's fight against deflation. July producer prices dropped a greater than expected 3.0 percent from a year ago after declining 2.4 percent in June. On the month, the index was 0.2 percent lower for a second month. Excluding the sales tax effect, the PPI was down 2.9 percent after declining 2.4 percent the month before. The July declined was the steepest contraction since a 3.8 per cent drop in the year to December 31, 2009, and marks the fourth consecutive month of contraction for the series.
The decline in part was from the continuing impact of the drop in petroleum & coal product prices which were down 22.8 percent from a year ago after sinking 20.4 percent in June. Iron & steel were also lower by 3.2 percent for a second month. The decline in chemicals and related products accelerated to 7.2 percent from 6.5 percent in June.
The producer price index, is a measure of the average price level for a fixed basket of capital and consumer goods paid by producers.
The producer price index focuses on the prices of goods transacted between companies. It was previously known as the corporate goods price index. The index reflects the price level for the supply and demand of individual industrial goods. This index is calculated by the BoJ Research and Statistics Department. Three indexes are contained in this release - the domestic producer index, the export price index and the import price index. It is the domestic index that market players follow. The PPI comprehensively tracks input price pressures; however, the PPI has a track record of increasing and not necessarily feeding through to the CPI because of weak demand. But if an increase in the PPI is followed by a rise in the CPI, concerns about inflation may prompt the Bank of Japan to raise interest rates.
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