| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | -0.2% | -0.3% to 0.1% | -0.7% | 0.2% |
| Year over Year | 5.5% | 5.2% to 5.8% | 5.1% | 5.8% |
Highlights
Producer inflation in Japan eased for the fifth straight month to a two-year low in May as the government's expanded utilities subsidies continued to cap energy costs and many commodities markets are softer on slowing global growth, particularly compared to last year's spike, data released Monday by the Bank of Japan showed.
In its quarterly Outlook Report released in April, the BoJ board revised up its forecast for inflation for the current fiscal year ending next March while predicting that consumer prices will lose some steam and fail to reach the bank's elusive 2 percent target in a sustainable manner. The bank will update its medium-term growth and inflation projections in the next report due on July 28.
The Econoday Consensus Divergence Index stood at minus 21, below zero, which indicates the Japanese economy is performing worse than expected after outperforming earlier. Excluding the impact of inflation, the index was at minus 20.
The corporate goods price index (CGPI) rose 5.1 percent on the year in May, below the median economist forecast of a 5.5 percent rise (forecasts ranged from 5.2 percent to 5.8 percent gains). It was the 27th consecutive gain but the lowest since 5.0 percent seen in June and May 2021, following increases of 5.9 percent (revised up from 5.8 percent) in April, 7.4 percent in March, 8.3 percent in February and 9.6 percent in January. December's 10.6 percent rise remains the highest in 42 years, since November 1980, when the index rose 11.8 percent during the 14-month period of double-digit percentage gains through December 1980 in the wake of the 1979 oil crisis triggered by the Iranian Revolution.
On the month, the domestic CGPI slumped 0.7 percent in May after rising 0.3 percent (revised up from a 0.2 percent gain) in April, edging up 0.1 percent in March, falling 0.3 percent in February and slowing from the recent peak of a 1.6 percent rise hit in April 2022. It was below the median economist forecast of a 0.2 percent drop (forecasts ranged from a 0.3 percent fall to a 0.1 percent gain). The decrease was led by lower costs for utilities (electricity, city gas), petroleum and coal products (gasoline, diesel oil, liquefied petroleum gas), non-ferrous metals and scrap and waste. The prices for farm produce, metal products and production machinery rose on the month.
The yen depreciated to an average ¥137.39 to the dollar in May from ¥133.40 in April and remained weak compared to ¥128.68 a year earlier. Combined with more stable energy and commodities markets, an earlier appreciation of the yen since late last year has helped lower import costs from elevated levels. The dollar briefly surged to a 32-year high of ¥151.94 in October 2022 but Japan's second wave of massive yen-buying forex intervention pushed it down to a low of ¥143.55 in the same month.
The CGPI's import price index in yen terms continued to post a decline on the year, falling 5.4 percent in May after dropping 3.8 percent in April and rising 9.4 percent in March, compared to a 9.6 percent drop after a 7.5 percent fall in April and a slight 0.1 percent rise in March in contract currencies. The yen-based price increase peaked at 49.2 percent in July 2022. The dollar appreciated 3.0 percent on the month against the yen after depreciating 0.4 percent in April, BoJ data showed.
The producer costs for electric power, gas and water rose 13.1 percent on the year in May but the pace of increase continued decelerating from 24.3 percent in April. The government began providing utilities subsidies in January and the program will continue through September.
Iron and steel prices posted a slower increase of 9.0 percent after rising 10.8 percent the previous month. Those for chemicals now showed a 0.4 percent drop after a 1.9 percent increase. The prices for non-ferrous metals fell 2.0 percent in May after falling 2.5 percent in April.
The prices for petroleum and coal products fell 1.8 percent on the year in May after dipping 6.6 percent in April and turning negative in January. The prices for lumber and wood products plunged 19.8 percent from a year earlier for the seventh straight drop after falling 18.2 percent.
Ceramic, stone and clay products eased to a 14.6 percent rise on the year in May from a 15.7 percent gain the previous month. Metal product prices were up 11.5 percent, off slightly from 12.0 percent.
The prices for foods and beverages -- a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI -- rose 7.9 percent on the year in May after rising 7.5 percent in April. Those for transport equipment (150.9 weight) rose 3.4 percent after a 3.9 percent gain the previous month.
In its quarterly Outlook Report released in April, the BoJ board revised up its forecast for inflation for the current fiscal year ending next March while predicting that consumer prices will lose some steam and fail to reach the bank's elusive 2 percent target in a sustainable manner. The bank will update its medium-term growth and inflation projections in the next report due on July 28.
The Econoday Consensus Divergence Index stood at minus 21, below zero, which indicates the Japanese economy is performing worse than expected after outperforming earlier. Excluding the impact of inflation, the index was at minus 20.
The corporate goods price index (CGPI) rose 5.1 percent on the year in May, below the median economist forecast of a 5.5 percent rise (forecasts ranged from 5.2 percent to 5.8 percent gains). It was the 27th consecutive gain but the lowest since 5.0 percent seen in June and May 2021, following increases of 5.9 percent (revised up from 5.8 percent) in April, 7.4 percent in March, 8.3 percent in February and 9.6 percent in January. December's 10.6 percent rise remains the highest in 42 years, since November 1980, when the index rose 11.8 percent during the 14-month period of double-digit percentage gains through December 1980 in the wake of the 1979 oil crisis triggered by the Iranian Revolution.
On the month, the domestic CGPI slumped 0.7 percent in May after rising 0.3 percent (revised up from a 0.2 percent gain) in April, edging up 0.1 percent in March, falling 0.3 percent in February and slowing from the recent peak of a 1.6 percent rise hit in April 2022. It was below the median economist forecast of a 0.2 percent drop (forecasts ranged from a 0.3 percent fall to a 0.1 percent gain). The decrease was led by lower costs for utilities (electricity, city gas), petroleum and coal products (gasoline, diesel oil, liquefied petroleum gas), non-ferrous metals and scrap and waste. The prices for farm produce, metal products and production machinery rose on the month.
The yen depreciated to an average ¥137.39 to the dollar in May from ¥133.40 in April and remained weak compared to ¥128.68 a year earlier. Combined with more stable energy and commodities markets, an earlier appreciation of the yen since late last year has helped lower import costs from elevated levels. The dollar briefly surged to a 32-year high of ¥151.94 in October 2022 but Japan's second wave of massive yen-buying forex intervention pushed it down to a low of ¥143.55 in the same month.
The CGPI's import price index in yen terms continued to post a decline on the year, falling 5.4 percent in May after dropping 3.8 percent in April and rising 9.4 percent in March, compared to a 9.6 percent drop after a 7.5 percent fall in April and a slight 0.1 percent rise in March in contract currencies. The yen-based price increase peaked at 49.2 percent in July 2022. The dollar appreciated 3.0 percent on the month against the yen after depreciating 0.4 percent in April, BoJ data showed.
The producer costs for electric power, gas and water rose 13.1 percent on the year in May but the pace of increase continued decelerating from 24.3 percent in April. The government began providing utilities subsidies in January and the program will continue through September.
Iron and steel prices posted a slower increase of 9.0 percent after rising 10.8 percent the previous month. Those for chemicals now showed a 0.4 percent drop after a 1.9 percent increase. The prices for non-ferrous metals fell 2.0 percent in May after falling 2.5 percent in April.
The prices for petroleum and coal products fell 1.8 percent on the year in May after dipping 6.6 percent in April and turning negative in January. The prices for lumber and wood products plunged 19.8 percent from a year earlier for the seventh straight drop after falling 18.2 percent.
Ceramic, stone and clay products eased to a 14.6 percent rise on the year in May from a 15.7 percent gain the previous month. Metal product prices were up 11.5 percent, off slightly from 12.0 percent.
The prices for foods and beverages -- a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI -- rose 7.9 percent on the year in May after rising 7.5 percent in April. Those for transport equipment (150.9 weight) rose 3.4 percent after a 3.9 percent gain the previous month.
Market Consensus Before Announcement
Producer inflation in Japan is expected to have eased for the fifth straight month in May, slowing to 5.5 percent from 5.8 percent in April and 7.4 percent in March, as the government's expanded utilities subsidies continued to cap energy costs and many commodities markets are softer on slowing global growth, particularly compared to last year's spike. On the month, the corporate goods price index is forecast to post its first drop in three months, down 0.2 percent, after rising 0.2 percent in April.
Definition
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.
Description
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.
