| Consensus | Consensus Range | Actual | Previous | Revised | |
| Month over Month | 0.7% | 0.4% to 1.2% | 0.9% | 2.3% | 2.8% |
| Year over Year | 5.6% | 5.4% to 6.2% | 6.3% | 4.9% | 5.3% |
Highlights
Producer inflation in Japan accelerated at a faster-than-expected pace in May, up by a three-year high of 6.3% on the year vs. an upwardly revised 5.3% rise in April, as global energy and commodities prices remain elevated amid the lingering Middle East conflict and supply disruptions and strong demand boosted non-ferrous metal prices further.
The 6.3% y/y increase in the corporate goods price index is the highest since 7.4% recorded in March 2023, when upstream prices were on a gradual downtrend after having peaked at 10.6% in December 2022 in the aftermath of Russia's invasion of Ukraine in February that year.
The rate of month-on-month increase eased to a still high 0.9% in May after surging to a revised 2.8% in April from a revised 0.9% in March, partly due to a slower rise in import costs thanks to a firmer yen in the wake of rounds of currency market intervention by Japan's Ministry of Finance to sell dollars aimed at preventing the yen from depreciating sharply. The initial spike in crude oil prices and the impact of shortages of naphtha and other materials have moderated slightly from the previous month.
Details:
Japan May corporate goods (producer) prices +6.3% y/y (Apr revised to +5.3% from +4.9%); median forecast +5.6%
Japan May CGPI y/y rise to its highest since +7.4% in Mar 2023
Japan May producer prices +0.9% m/m, 3rd straight rise (Apr revised to +2.8% from +2.3%); median forecast +0.7%
Japan May CGPI m/m rise led by fuels, utilities, chemical products, non-ferrous metals, plastics
Japan May CGPI y/y rise led by oil products, chemicals, non-ferrous metals
Japan producer inflation annual rate accelerates further, hit by elevated global energy, transportation costs, naphtha shortage in Japan
Japan producer inflation m/m rise eases in May from April as yen firms after MOF FX intervention, initial energy price spike moderates
Japan May CGPI: key energy prices; crude oil/coal products (+13.8% vs. Apr +5.3%)
Japan May CGPI: non-ferrous metals +42.2% vs. +37.9% in Apr amid continuing robust demand and copper shortages
Market Consensus Before Announcement
Japan’s producer inflation, measured by the corporate goods price index (CGPI), is expected to top 5 percent on the year in May, accelerating at the fastest pace in three years.
The CGPI is seen to have picked up momentum as ongoing geopolitical tensions in the Middle East continue to push prices of oil products and other raw materials, with the impact spreading to oil-derived products such as chemicals and adding further upward pressure on producer prices in the resource-poor country.
Coupled with the weakness of the yen, which is pushing up import costs, the CGPI is expected to rise 5.6 percent on the year in May, the highest since April 2023 when it hit 6.1 percent. The index surged unexpectedly to 4.9 percent in April, outpacing the market forecast of 3.2 percent.
On a month-on-month basis, the CGPI is expected to rise for the third straight month, rising 0.7 percent in May after jumping 2.3 percent in April, when price increases in oil products, chemical products, utilities, non-ferrous metals, as well as food and beverages led the gains.
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.