JP: Producer Price Index

Tue Apr 10 18:50:00 CDT 2018

Consensus Actual Previous Revised
Month over Month -0.1% -0.1% 0.0% 0.1%
Year over Year 2.0% 2.1% 2.5% 2.6%

Japan's producer price index increased by 2.1 percent on the year in March, down from 2.6 percent in February and just above the consensus forecast of 2.0 percent. This is the fourth consecutive decline in the PPI inflation after steady increases were recorded from mid-2016. The index fell 0.1 on the month in March after an increase of 0.1 percent in February, in line with the consensus forecast.

The fall in headline year-on-year change in the PPI in March was broad-based but largely driven by energy costs. Petroleum and coal prices (around 6 percent of the index) rose 7.0 percent on the year in February, down from a revised 11.4 percent in January, while there was also a drop in the year-on-year increase in utilities costs (around 7 percent of the index) from a revised 7.1 percent to 6.5 percent. Beverage and food prices, representing around 14 percent of the index, fell 0.1 percent on the year in February after an increase of 0.1 percent in January, while the prices of iron and steel, non-ferrous metals and metal products also increased at a slower pace.

In contrast to the official data published today showing weaker price pressures, PMI survey data indicate input costs rose strongly in both the manufacturing and service sectors in March.

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.