Producer inflation in Japan eased for the ninth straight month in September, staying at an over two-year low, as the government's utility subsidies continued to cut electricity and natural gas costs and the move among firms to pass last year's spike in commodities prices onto customers has peaked, data released Thursday by the Bank of Japan showed.

Corporate goods prices unexpectedly posted their first month-over-month drop in three months in light of a pullback in fuel prices after a recent uptick in gasoline and diesel costs.

The data also showed business import prices posted the sixth straight year-over-year decline, which is expected to be reflected in consumer prices later this year.

Econoday's Relative Performance Index (RPI) stood at plus 11, slightly above zero, which indicates the Japanese economy is performing moderately better than expected after outperforming with a wider margin recently. Excluding the impact of inflation, the RPI was at plus 36.

The corporate goods price index (CGPI) rose 2.0 percent on the year in September, below the median economist forecast of a 2.5 percent rise (forecasts ranged from 1.9 percent to 3.1 percent gains). It was the 31st consecutive gain but remains the slowest pace of increase since 1.0 percent seen in March 2021, following increases of 3.3 percent (revised from 3.2 percent) in August, 3.5 percent (revised from 3.4 percent) in July, 4.1 percent in June, 5.1 percent in May, 5.8 percent in April in April, 7.4 percent in March, 8.3 percent in February and 9.5 percent in January.

The 10.6 percent jump in December 2022 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 fell 0.3 percent in September after rising 0.3 percent in August and a revised 0.2 percent in July, and falling 0.1 percent in June and 0.7 percent in May. It has eased from the recent peak of a 1.6 percent rise hit in April 2022. The latest figure is weaker than the median economist forecast of a 0.2 percent rise (forecasts ranged from a 0.3 percent drop to a 0.3 percent gain). The decrease was led by lower costs for fuels (gasoline, diesel and heavy fuels), utilities (electricity and natural gas) and electrical equipment.

The yen depreciated further to an average ¥147.67 to the dollar in September from ¥144.77 in August and ¥141.21 in July during Tokyo trading hours. It was much weaker than ¥130.20 in January. The appreciation of the yen seen earlier this 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 sixth straight decline on the year. In yen terms, the index fell 14.0 percent in September after dropping a revised 11.4 percent in August. In contract currencies, the index dipped 15.6 percent in September after dipping a revised 15.6 percent in August. The yen-based price increase peaked at 49.5 percent in July 2022. The dollar appreciated 2.0 percent on the month against the yen after rising 2.5 percent in August and being unchanged in July.

The producer costs for electric power, gas and water slumped 18.0 percent on the year in September for the third straight drop after falling 11.5 percent in August and posting double-digit percentage gains earlier. The government has extended its utilities subsidies until yearend as many households are calling for help amid elevated costs for daily necessities. The program was launched in January and it was originally scheduled to be phased out at the end of September.

The prices for foods and beverages -- a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI -- rose 5.4 percent on the year in September after rising 6.1 percent in August. Those for transport equipment (150.9 weight) rose 2.4 percent after a 2.6 percent gain the previous month.

Iron and steel prices posted a slower increase of 1.1 percent after rising 2.1 percent the previous month. Those for chemicals fell 2.6 percent, with the pace of decline little changed from a 2.5 percent drop. The prices for non-ferrous metals rose 5.7 percent in September for the third straight rise after rising 6.7 percent in August.

The prices for petroleum and coal products also posted the third increase in a row, up 3.2 percent on the year in September, but the pace of increase slowed from 7.4 percent in August. The prices for lumber and wood products plunged 20.4 percent from a year earlier for the 11th straight drop after falling 22.8 percent in August.

The prices for ceramic, stone and clay products eased further to a 14.5 percent rise on the year in September from a 16.1 percent gain the previous month. Metal product prices were up 7.3 percent after rising 8.2 percent.

Producer inflation in Japan is expected to pose a 31st straight year-over-year increase, up 2.5 percent in September, but the pace of increase is seen decelerating for the ninth consecutive month after rising 3.2 percent in August as the move to reflect last year's spike in energy and commodities prices has peaked and the government expanded subsidies to refineries to help cap retail gasoline prices that had hit record highs in the summer. The corporate goods price index is forecast to post its third straight monthly rise, up 0.2 percent, following a 0.3 percent gain in August.

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.