Producer inflation in Japan unexpectedly accelerated to 2.8% in September from a revised 2.6% in August, led by a 12.4% jump in agriculture, forestry and fishery products vs. a 5.4% increase the previous month amid a serious rice supply shortage across the country.

The government temporarily revived utility subsides to cap energy costs during Japan's dangerously hot summer and warm autumn, resulting in a slower 7.9% rise in utilities in September, compared to a 10.5% gain in August. The data also showed more stable costs for iron/steel, up 0.2% after a 0.2% dip and a 1.3% rebound in the prices for refined petroleum products following a 3.8% fall. Some items had driven business prices lower until recently in payback for the pandemic spike that was triggered by the global supply chain breakdown and heightened geopolitical risks.

On the month, the corporate goods price index (CGPI) was unchanged after a 0.2% drop. Higher prices for farm produce (partly due to a rice supply shortage), fuels and tires were offset by lower costs for utilities, scrap and non-ferrous metals.

Producer inflation in Japan is expected to ease further to 2.4 percent in September from 2.5 percent in August and 3.0 percent in July as the government resumed utility subsides to support households and businesses hit by high costs. On the month, the corporate goods price index (CGPI) is seen down 0.3 percent following a 0.2 percent dip. The yen's appreciation has helped lower import costs.

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.