JP: Producer Price Index

Tue Oct 13 18:50:00 CDT 2015

Consensus Actual Previous
Year over Year -3.9% -3.9% -3.6%
Month over Month -0.5% -0.6%

The producer price index was down 3.9 percent on the year as expected. September was the sixth consecutive month of decline. The declines have accelerated each month. On the month, the index lost 0.5 percent for the fourth consecutive decline. The continuing decline will certainly not make the Bank of Japan pleased there is no sign of any upward price movement in today's release.

Petroleum products continue to drag down the index. This time they were down 26.9 percent from a year ago, slightly more than August's 26.6 percent decline. Prices for chemicals & related products also accelerated, declining 8.4 percent after 7.8 percent the month before. The pace of price decline also picked up for iron & steel, nonferrous metals and metal products. Prices did increase for general purpose machinery though.

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.