JP: Producer Price Index

Sun May 13 18:50:00 CDT 2018

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

Japan's producer price index increased by 2.0 on the year in April, down slightly from 2.1 percent in March, and just below the consensus forecast of 2.1 percent. This is the fifth consecutive decline in the PPI inflation after steady increases were recorded from mid-2016. The index rose 0.1 on the month in April after falling 0.1 percent in March, just above the consensus forecast of no change.

The fall in headline year-on-year change in the PPI in March was mainly driven by weaker year-on -year increases in utilities costs and prices for some manufactured products. Electric power, gas wand water charges, representing nearly 7 percent of the index fell 5.9 percent on the year after increasing 6.8 percent in March, offsetting a stronger increaser in prices of petroleum and coal products. Production machinery prices, representing around 4 percent of the total index, were flat on the year in April after increasing by 1.7 percent in March while general purpose machinery, representing nearly 3 percent of the index, fell 0,3 percent on the year after increasing 0.3 percent previously.

In line with the official data published today showing weaker price pressures, PMI survey data released earlier in the month indicate input costs rose at a slower pace in both the manufacturing and service sectors in April.

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.