|Year over Year||-3.6%||-3.0%|
|Month over Month||-0.6%||-0.2%|
The decline in producer prices worsened again in August not helping Bank of Japan's fight against deflation. July producer prices dropped a greater than expected 3.6 percent from a year ago after declining 3.1 percent in July. On the month, the index was 0.6 percent lower after declining 0.3 percent. Excluding the sales tax effect, the PPI was down 3.6 percent after declining 3.0 percent the month before. The decline marks the fifth 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 26.2 percent from a year ago after sinking 22.9 percent in July. Iron & steel were also lower by 4.0 percent. The decline in chemicals and related products accelerated to 7.7 percent from 7.2 percent in July.
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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