|Month over Month||0.3%||0.6%||0.4%|
|Year over Year||-1.5%||-1.2%||-2.2%|
December producer prices declined for the 21 consecutive month when compared with a year ago. In December, the PPI declined 1.2 percent on the year but was up 0.6 percent on the month. The depth of the annual drop has eased the index was down 4.4 percent in May. A major reason that the PPI's decline eased can be found in the petroleum & coal products category. In November, it declined 5.6 percent on the year while in December the price increased 3.7 percent thanks to rising crude oil prices. Nonferrous metals prices also went from a decline of 5.4 percent to an increase of 1.4 percent.
The December report shows that deflationary pressures are continuing to moderate in Japanese input costs and also provide some support for the Bank of Japan's view that the negative impact of global oil and other commodity prices is moderating. The BoJ has consistently argued that weak global energy prices have been one of the major factors holding down consumer prices, and will likely see recent increases in petroleum and coal prices as evidence suggesting that consumer price pressures will build in the medium-term.
The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods paid by producers. Analysts look to the PPI for early signs of inflation in the production process.
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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