| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | 0.2% | -0.3% to 0.6% | 0.1% | -0.2% | -0.1% |
| Year over Year | 3.5% | 3.2% to 3.9% | 3.6% | 4.1% | 4.3% |
Highlights
Producer inflation in Japan eased for the seventh straight month in July, hitting a more than two-year low, as the government's expanded utilities subsidies continued to cap energy costs and many commodities markets remained tame on slowing global growth, data released Thursday by the Bank of Japan showed.
The data also showed business import prices posted the fourth straight year-over-year decline, which is expected to ease the burden of households with a delay of about six months.
In its quarterly Outlook Report for July, the BoJ board revised up its forecast for consumer inflation for fiscal 2023 ending next March to 2.5 percent from 1.8 percent projected in April while predicting that inflation will lose some steam from 3.0 percent in fiscal 2022 and fail to be anchored around the bank's 2 percent target in a sustainable manner, averaging 1.9 percent (revised down from April's 2.0 percent) in fiscal 2044 and 1.6 percent (unchanged) in fiscal 2015.
The Econoday Consensus Divergence Index stood at plus 5, just above zero, which indicates the Japanese economy is performing slightly better than expected after outperforming with a wider margin earlier. Excluding the impact of inflation, the index was at plus 6.
The corporate goods price index (CGPI) rose 3.6 percent on the year in July, just above the median economist forecast of a 3.5 percent rise (forecasts ranged from 3.2 percent to 3.9 percent gains). It was the 29th consecutive gain and the slowest pace of increase since 1.0 percent seen in March 2021, following increases of 4.3 percent (revised from 4.1 percent) in June, 5.3 percent (revised from 5.2 percent) in May, 6.1 percent in April (revised from 6.0 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 edged up 0.1 percent in July after falling 0.1 percent (revised from a 0.2 percent drop) in June, dipping 0.7 percent in May and rising 0.3 percent in April, and slowing from the recent peak of a 1.6 percent rise hit in April 2022. It was lower than the median economist forecast of a 0.2 percent rise (forecasts ranged from a 0.3 percent drop to a 0.6 percent gain). The month-over-month increase was led by higher costs for fuels (gasoline, diesel), production equipment and non-ferrous metals as well as food and beverages (whisky, wheat flour, bread).
The yen appreciated slightly to an average ¥142.18 to the dollar in July from ¥144.85 in June, but it was still weaker than ¥137.39 in May, ¥133.40 in April and ¥132.78 a year earlier. Combined with easing energy and commodities markets, an earlier appreciation of the yen since late last year had 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 posted the fourth straight decline on the year. In yen terms, the index fell 14.1 percent in July after dropping 11.4 percent in June, 5.4 percent in May and 3.7 percent in April and rising 9.4 percent in March. In contract currencies, the index dipped 15.6 percent in July after decreases of 14.3 percent in June, 9.5 percent in May and 7.3 percent in April and a 0.1 percent rise in March. The yen-based price increase peaked at 49.2 percent in July 2022. The dollar was unchanged on the month against the yen after appreciating 2.8 percent in June and 3.0 percent in May and depreciating 0.4 percent in April, BOJ data showed.
The producer costs for electric power, gas and water fell 3.3 percent on the year in July after rising 4.4 percent in June and posting double-digit percentage gains earlier. The government began providing utilities subsidies in January and the program will continue through September.
Iron and steel prices posted a slower increase of 4.0 percent after rising 7.6 percent the previous month. Those for chemicals fell 3.3 percent after a 3.8 percent drop. The prices for non-ferrous metals rose 5.8 percent in July after falling 0.5 percent in June.
The prices for petroleum and coal products also rebounded 1.7 percent on the year in July after dipping 2.5 percent in June. The prices for lumber and wood products plunged 23.1 percent from a year earlier for the ninth straight drop after falling 22.2 percent in June.
The prices for ceramic, stone and clay products eased further to a 15.2 percent rise on the year in July from a 16.7 percent gain the previous month. Metal product prices were up 7.3 percent, slowing from a 9.6 percent rise.
The prices for foods and beverages -- a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI -- rose 6.1 percent on the year in July after rising 7.7 percent in June. Those for transport equipment (150.9 weight) rose 3.0 percent after a 3.6 percent gain the previous month.
The data also showed business import prices posted the fourth straight year-over-year decline, which is expected to ease the burden of households with a delay of about six months.
In its quarterly Outlook Report for July, the BoJ board revised up its forecast for consumer inflation for fiscal 2023 ending next March to 2.5 percent from 1.8 percent projected in April while predicting that inflation will lose some steam from 3.0 percent in fiscal 2022 and fail to be anchored around the bank's 2 percent target in a sustainable manner, averaging 1.9 percent (revised down from April's 2.0 percent) in fiscal 2044 and 1.6 percent (unchanged) in fiscal 2015.
The Econoday Consensus Divergence Index stood at plus 5, just above zero, which indicates the Japanese economy is performing slightly better than expected after outperforming with a wider margin earlier. Excluding the impact of inflation, the index was at plus 6.
The corporate goods price index (CGPI) rose 3.6 percent on the year in July, just above the median economist forecast of a 3.5 percent rise (forecasts ranged from 3.2 percent to 3.9 percent gains). It was the 29th consecutive gain and the slowest pace of increase since 1.0 percent seen in March 2021, following increases of 4.3 percent (revised from 4.1 percent) in June, 5.3 percent (revised from 5.2 percent) in May, 6.1 percent in April (revised from 6.0 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 edged up 0.1 percent in July after falling 0.1 percent (revised from a 0.2 percent drop) in June, dipping 0.7 percent in May and rising 0.3 percent in April, and slowing from the recent peak of a 1.6 percent rise hit in April 2022. It was lower than the median economist forecast of a 0.2 percent rise (forecasts ranged from a 0.3 percent drop to a 0.6 percent gain). The month-over-month increase was led by higher costs for fuels (gasoline, diesel), production equipment and non-ferrous metals as well as food and beverages (whisky, wheat flour, bread).
The yen appreciated slightly to an average ¥142.18 to the dollar in July from ¥144.85 in June, but it was still weaker than ¥137.39 in May, ¥133.40 in April and ¥132.78 a year earlier. Combined with easing energy and commodities markets, an earlier appreciation of the yen since late last year had 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 posted the fourth straight decline on the year. In yen terms, the index fell 14.1 percent in July after dropping 11.4 percent in June, 5.4 percent in May and 3.7 percent in April and rising 9.4 percent in March. In contract currencies, the index dipped 15.6 percent in July after decreases of 14.3 percent in June, 9.5 percent in May and 7.3 percent in April and a 0.1 percent rise in March. The yen-based price increase peaked at 49.2 percent in July 2022. The dollar was unchanged on the month against the yen after appreciating 2.8 percent in June and 3.0 percent in May and depreciating 0.4 percent in April, BOJ data showed.
The producer costs for electric power, gas and water fell 3.3 percent on the year in July after rising 4.4 percent in June and posting double-digit percentage gains earlier. The government began providing utilities subsidies in January and the program will continue through September.
Iron and steel prices posted a slower increase of 4.0 percent after rising 7.6 percent the previous month. Those for chemicals fell 3.3 percent after a 3.8 percent drop. The prices for non-ferrous metals rose 5.8 percent in July after falling 0.5 percent in June.
The prices for petroleum and coal products also rebounded 1.7 percent on the year in July after dipping 2.5 percent in June. The prices for lumber and wood products plunged 23.1 percent from a year earlier for the ninth straight drop after falling 22.2 percent in June.
The prices for ceramic, stone and clay products eased further to a 15.2 percent rise on the year in July from a 16.7 percent gain the previous month. Metal product prices were up 7.3 percent, slowing from a 9.6 percent rise.
The prices for foods and beverages -- a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI -- rose 6.1 percent on the year in July after rising 7.7 percent in June. Those for transport equipment (150.9 weight) rose 3.0 percent after a 3.6 percent gain the previous month.
Market Consensus Before Announcement
Producer inflation in Japan is expected to ease for a seventh straight month in July to an over two-year low of 3.5 percent increase after a 4.1 percent gain in June as the government's expanded utilities subsidies continued to cap energy costs and many commodities markets remained tame amid slower global growth. The corporate goods price index is forecast to post its first month-over-month rise in three months in July, up 0.2 percent, following a 0.2 percent fall in June.
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.
