JP: Producer Price Index

Tue Jul 11 18:50:00 CDT 2017

Consensus Actual Previous
Month over Month 0.0% 0.0% 0.0%
Year over Year 2.1% 2.1% 2.1%

As expected, the June producer price index was unchanged on the month for a second month and was up an annual 2.1 percent for the third month. The annual change has been positive since January 2017.

Among the PPI's components, the annual increase was dominated by petroleum & related products which were up 11.1 percent after increasing 17.7 percent in May. Iron & Steel were up 10.8 percent after 10.9 percent the month before. Non-ferrous metals were up 11.4 percent after increasing 9.7 percent in May. Numerous products saw annual price declines including electrical machinery & equipment and information & communications equipment.

Despite the recent pickup in producer prices, consumer inflation remains weak. Companies continue to be cautious about raising retail prices amid concern that higher prices would lower sales. However, the recent pickup in private consumption may prompt some companies to gradually raise prices.

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.