| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | 0.0% | -0.1% to 0.1% | 0.0% | 0.3% | |
| Year over Year | 0.0% | -0.1% to 0.1% | 0.2% | 0.0% | 0.2% |
Highlights
Producer inflation in Japan rose 0.2 percent on the year in January, coming in higher than the consensus forecast of being flat but staying on an easing trend as government subsidies continued to cap utility costs and the prices for lumber, steel and chemicals remained below year-earlier levels amid slower global demand.
December's unchanged reading was revised up to a 0.2 percent rise, resulting in a 35th consecutive year-over-year increase in January amid firmer prices for fuels, production machinery and electronic equipment. The pace of increase has slowed from 0.5 percent in November, 1.1 percent in October, 2.2 percent in September and a recent peak of 10.6 percent seen in December 2022.
On the month, the corporate goods price index was unchanged, as expected, after rising 0.3 percent in the previous two months. Higher costs for utilities, electric machinery and metal products offset lower prices for farm produce, refined petroleum products (heavy fuels, naphtha and jet fuel) and production equipment.
Econoday's Relative Performance Index (RPI) stood at minus 19, below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the RPI was at minus 10.
The producer costs for electric power, gas and water slumped 27.7 percent on the year in January for the seventh straight drop after falling 27.6 percent in December and posting double-digit percentage gains earlier. The government has extended its utilities subsidies until April 2024. The program aimed at easing the pain of both households and businesses was launched in January 2023 and it was originally scheduled to be phased out at the end of September that year.
Prices for lumber and wood products fell 11.7 percent from a year earlier for the 14th straight drop after falling 15.5 percent the previous month. Iron and steel prices fell 3.3 percent after slipping 3.4 percent the previous month. Those for chemicals dipped 1.1 percent following a 1.5 percent drop.
Prices for foods and beverages rose 4.4 percent on the year in January after rising 4.5 percent in December. Those for transport equipment rose 2.2 percent after a 2.0 percent gain the previous month.
The prices for non-ferrous metals rose 3.2 percent on year in for the seventh straight increase after rising 4.4 percent. Those for petroleum and coal products also posted the seventh increase in a row, up 6.6 percent, following a 4.6 percent rise.
The prices for ceramic, stone and clay products eased further to a 10.9 percent rise on year in January from a 11.7 percent gain the previous month. Metal product prices were up 4.1 percent, also slowing from a 4.9 percent increase.
The CGPI's import price index posted the 10th straight decline on the year but the pace of decrease was the slowest in nine months, exerting less downward pressures on overall producer prices. In yen terms, the index fell 0.2 percent in January after falling 4.9 percent in December. In contract currencies, the index dipped 8.8 percent after falling a revised 9.4 percent. The yen-based import cost increase peaked at 49.5 percent in July 2022.
December's unchanged reading was revised up to a 0.2 percent rise, resulting in a 35th consecutive year-over-year increase in January amid firmer prices for fuels, production machinery and electronic equipment. The pace of increase has slowed from 0.5 percent in November, 1.1 percent in October, 2.2 percent in September and a recent peak of 10.6 percent seen in December 2022.
On the month, the corporate goods price index was unchanged, as expected, after rising 0.3 percent in the previous two months. Higher costs for utilities, electric machinery and metal products offset lower prices for farm produce, refined petroleum products (heavy fuels, naphtha and jet fuel) and production equipment.
Econoday's Relative Performance Index (RPI) stood at minus 19, below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the RPI was at minus 10.
The producer costs for electric power, gas and water slumped 27.7 percent on the year in January for the seventh straight drop after falling 27.6 percent in December and posting double-digit percentage gains earlier. The government has extended its utilities subsidies until April 2024. The program aimed at easing the pain of both households and businesses was launched in January 2023 and it was originally scheduled to be phased out at the end of September that year.
Prices for lumber and wood products fell 11.7 percent from a year earlier for the 14th straight drop after falling 15.5 percent the previous month. Iron and steel prices fell 3.3 percent after slipping 3.4 percent the previous month. Those for chemicals dipped 1.1 percent following a 1.5 percent drop.
Prices for foods and beverages rose 4.4 percent on the year in January after rising 4.5 percent in December. Those for transport equipment rose 2.2 percent after a 2.0 percent gain the previous month.
The prices for non-ferrous metals rose 3.2 percent on year in for the seventh straight increase after rising 4.4 percent. Those for petroleum and coal products also posted the seventh increase in a row, up 6.6 percent, following a 4.6 percent rise.
The prices for ceramic, stone and clay products eased further to a 10.9 percent rise on year in January from a 11.7 percent gain the previous month. Metal product prices were up 4.1 percent, also slowing from a 4.9 percent increase.
The CGPI's import price index posted the 10th straight decline on the year but the pace of decrease was the slowest in nine months, exerting less downward pressures on overall producer prices. In yen terms, the index fell 0.2 percent in January after falling 4.9 percent in December. In contract currencies, the index dipped 8.8 percent after falling a revised 9.4 percent. The yen-based import cost increase peaked at 49.5 percent in July 2022.
Market Consensus Before Announcement
Producer inflation in Japan is expected to be unchanged on the year for a second straight month in January after rising for 33 months until November as government subsidies continued to cap utility costs and the prices for lumber, steel and chemicals remained below year-earlier levels amid slower global demand. The corporate goods price index (CGPI) could post its first year-over-year decline in nearly three years in January given easing gains in other commodities. The CGPI is also forecast to be unchanged on the month after rising 0.3 percent in the previous two months. The deprecation of the yen and expectations for China's economic stimulus measures lifted the import costs for non-ferrous metals while domestic gasoline and other fuel prices may show a pullback after rising in the prior month.
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.
