Producer inflation in Japan eased for the 10th straight month in October, slowing to a weaker-than-expected 0.8 percent rise on the year, as the government reinforced subsidies to cap utility costs and weaker global demand, particularly from China, damped commodities markets, data released Monday by the Bank of Japan showed.

Corporate goods prices unexpectedly slipped 0.4 percent on the month for a second straight drop on a pullback in fuel costs and lower prices for meat and chemical products, offsetting slight gains in natural gas and alcoholic drinks.

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

Econoday's Relative Performance Index (RPI) stood at plus 11, above zero, which indicates the Japanese economy is performing moderately slightly better than expected after outperforming with a wider margin recently. Excluding the impact of inflation, the RPI was at minus 6.

The corporate goods price index (CGPI) rose 0.8 percent on the year in October, below the median economist forecast of a 1.1 percent rise (forecasts ranged from 0.9 percent to 1.4 percent gains). It is the 32nd consecutive gain but the weakest since the 0.4 percent drop seen in February 2021, following increases of 2.2 percent (revised up from 2.0 percent) in September, 3.4 percent (revised from 3.3 percent) in August, 3.6 percent (revised from 3.5 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 0.4 percent in September after falling 0.2 percent (revised up from a 0.3 percent drop) in September, rising 0.3 percent in August and 0.3 percent (revised from a 0.2 percent rise) 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 much weaker than the median economist forecast of a 0.1 percent rise (forecasts ranged from a 0.1 percent drop to a 0.4 percent gain). The decrease was led by a pullback in fuels (gasoline, diesel and heavy fuels) and lower prices for meat and chemicals.

The yen depreciated further to an average¥149.53 to the dollar in October from ¥147.67 in September, ¥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 seventh straight decline on the year. In yen terms, the index fell 11.7 percent in October after dropping a revised 13.9 percent in September. In contract currencies, the index dipped 12.5 percent in October after dipping a revised 15.5 percent. The yen-based price increase peaked at 49.5 percent in July 2022. The dollar appreciated 1.3 percent on the month against the yen after rising 2.0 percent in September and 2.5 percent in August.

The producer costs for electric power, gas and water slumped 20.0 percent on the year in October for the fourth straight drop after falling 17.7 percent in September and posting double-digit percentage gains earlier. The government has extended its utilities subsidies until yearend. 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 4.9 percent on the year in October after rising 5.7 percent in September. Those for transport equipment (150.9 weight) rose 2.6 percent after a 2.7 percent gain the previous month.

Iron and steel prices fell 3.9 percent after rising 1.1 percent the previous month. Those for chemicals fell 2.5 percent following a 2.5 percent drop. The prices for non-ferrous metals rose 3.9 percent in October for the fourth straight rise after rising 5.7 percent in September.

The prices for petroleum and coal products also posted the fourth increase in a row, up 0.7 percent on the year in October, but the pace of increase slowed sharply from 3.2 percent in September. The prices for lumber and wood products plunged 18.5 percent from a year earlier for the 12th straight drop after falling 20.4 percent in September.

The prices for ceramic, stone and clay products eased further to a 12.7 percent rise on the year in October from a 14.9 percent gain the previous month. Metal product prices were up 6.1 percent after rising 7.8 percent.

Producer inflation in Japan is expected to mark a 32nd straight year-over-year increase, up 1.1 percent in October, but the pace of increase continues to decelerate for the 10th consecutive month after rising 2.0 percent in September as slower demand from China led to weaker international commodities markets and the Japanese government reinforced subsidies to refineries to counter a politically unpopular spike in retail gasoline prices. The corporate goods price index is forecast to rebound slightly on the month, up just 0.1 percent, after falling 0.3 percent the previous month.

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.