Producer prices in Japan rose a steep 0.9 percent on the year in April, as expected, reflecting concerns over global copper supply, rising import costs amid the weak yen and the already waned base-year effect of utility subsidies. It followed increases of 0.9 percent (revised up from 0.8 percent) in March and 0.8 percent (revised from 0.7 percent) in February.

The 38th straight year-over-year increase was led by non-ferrous metals, fuels and production equipment but the pace of increase is far below the recent peak of 10.6 percent reached in December 2022. Slower price gains were seen in food and beverages, metal products and transport equipment. The downward pressure still comes from utilities, which fell 19.7 percent in April (19.1 percent in March), and the prices for lumber and steel also remain below year-earlier levels.

On the month, the corporate goods price index (CGPI) rose 0.3 percent, just under the median forecast of a 0.4 percent rise and following a 0.2 percent gain in March. It has eased from the recent peak of a 1.6 percent rise hit in April 2022. The increase in April was led by non-ferrous metals (copper), refined petroleum products (naphtha, heavy fuels and gasoline), iron and steel (zinc-coated steel sheets) and farm produce (pork and chicken eggs).

Econoday's Relative Performance Index (RPI) stands at minus 27, below zero, which indicates the Japanese economy is performing worse than expected. Excluding the impact of inflation, the RPI is at minus 8.

The CGPI's import price index in yen terms jumped 6.4 percent on year in April, which remains the highest since the 9.4 percent rise in March 2023 and follows a 1.4 percent rise in March. In contract currencies, the index dropped 4.3 percent after falling 6.9 percent. The yen-based import cost increase peaked at 49.5 percent in July 2022.

Producer inflation in Japan is expected to accelerate slightly to 0.9 percent in April after rising to 0.8 percent in March from 0.7 percent in February as the weak yen is pushing up import costs and the base-year effect of utility subsidies had already waned. The downward pressure still comes from utilities, which fell 19.1 percent in March, and the prices for lumber and steel also remain below year-earlier levels. On the month, the corporate goods price index (CGPI) is forecast to rise 0.4 percent following a 0.4 percent gain, which was led by non-ferrous metals, farm produce and utilities.

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.