| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Month over Month | 0.3% | 0.2% to 0.4% | 0.3% | 0.2% |
| Year over Year | 3.0% | 2.8% to 3.0% | 3.0% | 2.9% |
Highlights
Producer inflation in Japan continued accelerating to 3.0 percent in July, as expected, after the government ended its 18-month campaign to provide hefty subsidies for electricity and natural gas but the prices charged among firms are set to drift lower again as a similar scheme has been revived over the summer amid sluggish voter approval ratings.
It followed a 2.9 percent increase in June, a jump to 2.6 percent in May from 1.2 percent in April, according to the Bank of Japan. The 42nd straight year-over-year increase was led by a 6.7 percent rise in utilities, following no change in June, a 7.2 percent drop in May and a 19.6 percent slump in April, as well as stabilizing flat costs for lumber/wood products and iron/steel -- the two main factors that had driven business prices lower in reaction to the pandemic era spike triggered by the global supply chain breakdown that was made worse by heightened geopolitical risks.
Non-ferrous metals still grew 18.5 percent on year in July after surging 19.4 percent in June and 20.9 percent in May on concerns that the pickup in the world's second-largest economy would cause shortages of copper and other metals. More recently, the prices for coper and other non-ferrous metals have turned softer amid growing fears that China's uneven pickup will falter. Metal products and production/general machinery also showed slighter easing price pressures.
The pace of increase in overall prices charged between businesses remains the fastest since the 3.4 percent increase in August 2023, but far below the recent peak of 10.6 percent hit in December 2022. The prices for food and beverages have perked up again, above 4 percent, after showing stabilizing earlier below 3 percent, while those for transport equipment are steady between 1 percent and 2 percent.
The government discontinued subsides for electricity and natural gas supplied to households and businesses in June, which was reflected in July bills, after halving them the previous month. Prime Minister Fumio Kishida reversed his decision as he saw voter approval rates dip from already low levels. Many people are unhappy with high living costs while the government is raising taxes to boost its military spending to cope with what it terms as a Chinese threat. He revived a similar scheme for three months ending in October to help cushion an expected surge in utility costs during Japan's dangerously hot summer and warm autumn.
On the month, the corporate goods price index (CGPI) rose 0.3 percent, in line with the median forecast of a 0.3 percent rise and following increases of 0.2 percent in June and 0.7 percent in May. It has eased from the recent peak of the 1.6 percent rise reached in April 2022. The increase in July was led by utilities (electricity, natural gas) and farm produce (polished rice, pork, chicken eggs) as seen in the prior month. It was also driven higher by transport equipment (auto parts and passenger cars) and food/beverages (snacks).
Econoday's Relative Performance Index (RPI) stands at plus 5, just above zero, which indicates the Japanese economy is performing largely as expected. Excluding the impact of inflation, the RPI is at plus 34.
The CGPI's import price index in yen terms rose 10.8 percent in July, which remains the highest since the 15.0 percent rise in February 2023 and follows a 9.5 percent rise in June. In contract currencies, the index rose 1.6 percent after inching up a revised 0.5 percent in June and falling for the 14th consecutive month in May with a 2.9 percent drop (down 16.3 percent in July 2023). The yen-based import cost increase peaked at 49.5 percent in July 2022.
The yen depreciated further to an average ¥158.09 against the dollar in July during Tokyo trading hours from ¥157.82 in June and ¥156.13 in May. Last year, the yen's relative strength in a range of ¥130 to ¥134 in the first four months of 2023 helped lower import costs, which slumped as much as 14.7 percent in yen terms in July 2023.
In August 2024, the yen has regained most of its lost ground for the year on market expectations that the BoJ was set to raise its short-term interest rate target more often than previously believed, although it would be still at a snail's pace compared to other major economies. In July, the dollar hit a fresh 38-year high above ¥161.70 but it has eased to around ¥154 on stealth yen-buying invention on July 11 and 12 by the Ministry of Finance took advantage of the US CPI data for June that showed easing inflation. The data prompted some dollar selling on the notion that the Federal Reserve may lower interest rates in September.
It followed a 2.9 percent increase in June, a jump to 2.6 percent in May from 1.2 percent in April, according to the Bank of Japan. The 42nd straight year-over-year increase was led by a 6.7 percent rise in utilities, following no change in June, a 7.2 percent drop in May and a 19.6 percent slump in April, as well as stabilizing flat costs for lumber/wood products and iron/steel -- the two main factors that had driven business prices lower in reaction to the pandemic era spike triggered by the global supply chain breakdown that was made worse by heightened geopolitical risks.
Non-ferrous metals still grew 18.5 percent on year in July after surging 19.4 percent in June and 20.9 percent in May on concerns that the pickup in the world's second-largest economy would cause shortages of copper and other metals. More recently, the prices for coper and other non-ferrous metals have turned softer amid growing fears that China's uneven pickup will falter. Metal products and production/general machinery also showed slighter easing price pressures.
The pace of increase in overall prices charged between businesses remains the fastest since the 3.4 percent increase in August 2023, but far below the recent peak of 10.6 percent hit in December 2022. The prices for food and beverages have perked up again, above 4 percent, after showing stabilizing earlier below 3 percent, while those for transport equipment are steady between 1 percent and 2 percent.
The government discontinued subsides for electricity and natural gas supplied to households and businesses in June, which was reflected in July bills, after halving them the previous month. Prime Minister Fumio Kishida reversed his decision as he saw voter approval rates dip from already low levels. Many people are unhappy with high living costs while the government is raising taxes to boost its military spending to cope with what it terms as a Chinese threat. He revived a similar scheme for three months ending in October to help cushion an expected surge in utility costs during Japan's dangerously hot summer and warm autumn.
On the month, the corporate goods price index (CGPI) rose 0.3 percent, in line with the median forecast of a 0.3 percent rise and following increases of 0.2 percent in June and 0.7 percent in May. It has eased from the recent peak of the 1.6 percent rise reached in April 2022. The increase in July was led by utilities (electricity, natural gas) and farm produce (polished rice, pork, chicken eggs) as seen in the prior month. It was also driven higher by transport equipment (auto parts and passenger cars) and food/beverages (snacks).
Econoday's Relative Performance Index (RPI) stands at plus 5, just above zero, which indicates the Japanese economy is performing largely as expected. Excluding the impact of inflation, the RPI is at plus 34.
The CGPI's import price index in yen terms rose 10.8 percent in July, which remains the highest since the 15.0 percent rise in February 2023 and follows a 9.5 percent rise in June. In contract currencies, the index rose 1.6 percent after inching up a revised 0.5 percent in June and falling for the 14th consecutive month in May with a 2.9 percent drop (down 16.3 percent in July 2023). The yen-based import cost increase peaked at 49.5 percent in July 2022.
The yen depreciated further to an average ¥158.09 against the dollar in July during Tokyo trading hours from ¥157.82 in June and ¥156.13 in May. Last year, the yen's relative strength in a range of ¥130 to ¥134 in the first four months of 2023 helped lower import costs, which slumped as much as 14.7 percent in yen terms in July 2023.
In August 2024, the yen has regained most of its lost ground for the year on market expectations that the BoJ was set to raise its short-term interest rate target more often than previously believed, although it would be still at a snail's pace compared to other major economies. In July, the dollar hit a fresh 38-year high above ¥161.70 but it has eased to around ¥154 on stealth yen-buying invention on July 11 and 12 by the Ministry of Finance took advantage of the US CPI data for June that showed easing inflation. The data prompted some dollar selling on the notion that the Federal Reserve may lower interest rates in September.
Market Consensus Before Announcement
Producer inflation in Japan is expected to stay on a gradual uptrend, rising to 3.0 percent in July in light of higher global energy markets and elevated import costs amid the weaker yen, after accelerating to 2.9 percent in June from 2.4 percent in May and 0.9 percent in April. It would remain the highest increase since the 3.4 percent rise in August 2023. The government raised the renewable energy charge for fiscal 2024 in April. It also ended its subsidies for electricity and natural gas in June, which were reflected in July bills. The impact of these measures is partly offset by softer non-ferrous metal prices amid concerns over Chinese slowdown.
On the month, the corporate goods price index (CGPI) is forecast to rise 0.3 percent for a sixth straight increase, following a 0.2 percent gain in June, which was led by utilities, refined petroleum products, metal products and farm produce.
On the month, the corporate goods price index (CGPI) is forecast to rise 0.3 percent for a sixth straight increase, following a 0.2 percent gain in June, which was led by utilities, refined petroleum products, metal products and farm produce.
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.
