Producer inflation in Japan measured by the corporate goods price index is expected to post a 2.7% increase on year in November after easing slightly to the rate in October from 2.8% in September (revised up from 2.7%), showing elevated production costs boosted by an earlier spike in rice prices in the aftermath of protracted domestic supply shortages.

But the upstream inflation pressures have been easing off, reflecting slower global growth hit by the protectionist U.S. trade policy. The 12-month moving average for November would be 3.3%, down from 3.4% in October, 3.5% in September and 3.6% in August. The year-on-year increase in the CGPI decelerated to a 15-month low of 2.5% in July (the slowest since 1.2% in April 2024) from an upwardly revised 2.8% in June after having hit a recent peak of 4.3% in each of February and March this year (the highest since 4.5% in June 2023).

The key upside risk to producer inflation is the persistent weakness of the yen, which has pushed up import costs. The CGPI import index jumped 2.4% (revised from 2.5%) on the month in yen terms in October before its pace slowed to +1.5% in November. It now has posted gains for five months after having declined in the previous five months. The year-on-year drop in the index has shrunk to 1.8% in November and a revised 1.7% in October from a sharper 12.0% in June. The monthly average dollar/yen exchange rate during the Tokyo trading hours surged to Y155.12 in November from Y151.28 in October and Y147.94 in September and a recent low of Y144.50 in June, according to the Bank of Japan. The U.S. unit stood at Y153.72 in November 2024.

Japan Nov corporate goods (producer) prices +2.7% y/y (Oct +2.7%); median forecast +2.7%

Japan Nov producer prices +0.3% m/m, third straight rise (Oct revised +0.5% from +0.4%); median forecast +0.3%

Japan Nov CGPI m/m rise led by utilities, non-ferrous metals, food/beverages, agri products

Japan Nov producer inflation y/y rise led by easing but still high farm produce prices (+30.1% vs. Oct revised to +31.1% from +31.4%)

Japan Nov CGPI: key energy prices continue falling; crude oil/coal products (-2.6% vs. -0.8% in Oct)

Japan’s corporate goods price index (CGPI), or producer inflation, is expected
to remain firm in November, supported by a continued uptrend in food prices,
including rice, rising industrial metal prices such as nonferrous metals, and a
weaker yen that is lifting import costs. International commodity prices are also
trending higher.
The November CGPI is expected to rise 2.7% on the year, unchanged from
October, driven by elevated rice prices and stronger nonferrous metals. Farm
produce prices were up 31.4% in October versus a revised 31.9% in
September.
The end of the government’s electricity and gas bill subsidies is also expected
to generate upward pressure on overall producer prices. Copper prices have
climbed amid yen weakness and expectations for stronger demand as
U.S.–China tensions ease. Meanwhile, soft domestic demand weighed on the
prices of steel products and chemicals.
On a month-on-month basis, the CGPI is projected to rise for the third straight
month in November, increasing 0.3% after a 0.4% gain in October and a revised
0.5% rise in September.

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.