JP: Producer Price Index

Tue Apr 12 18:50:00 CDT 2016

Actual Previous Consensus
Month over Month -0.1% -0.2%
Year over Year -3.8% -3.4% -3.5%

March producer price index was down 0.1 percent on the month and 3.8 percent lower from a year ago. This was the twelfth consecutive decline on an annual basis as deflation continues to plague the Japanese economy. Once again, petroleum & coal products weighed heavily on the index declining by 24.9 percent from a year ago after dropping 22.4 percent in February. Nonferrous metals also weighed, dropping 12.5 percent after sinking 12.6 percent the month before. Food prices were up only 0.6 percent on the year after increasing 1.1 percent in February.

Clearly the Bank of Japan will not be pleased with this report that shows the economy is still heavily entrenched in deflation.

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.