| Consensus | Consensus Range | Actual | Previous | Revised | |
| Month over Month | 0.6% | -0.5% to 0.6% | 0.1% | 0.4% | 0.5% |
| Year over Year | 7.5% | 6.6% to 7.5% | 7.2% | 7.1% | 7.3% |
Highlights
Producer inflation in Japan unexpectedly decelerated to 7.2% in July from an upwardly revised 7.3% (initially 7.1%) in June in light of slower rises in the prices for crude oil and chemical products, which offset faster gains in non-ferrous metals, iron/steel and utilities. Overall upstream price pressures remain high as the lingering Mideast conflict is keeping energy and transportation costs elevated, global memory chip shortages have boosted the prices for electronic goods and import prices stay high amid the weak yen. The 7.3% y/y increase in the corporate goods price index in June 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.
Bank of Japan data showed the dollar averaged at ¥162.55 during Tokyo trading hours in July, up sharply from ¥146.71 a year earlier, as dollar-denominated securities have attracted investors with higher returns compared to yen assets. The BOJ has been raising interest rates gradually in the past two years as part of normalization but its policy rate at 1% is still well below the target range for the U.S. federal funds rate at 3.5% to 3.75%.
A rare joint dollar-selling market intervention by the Japanese and U.S. governments late last month pushed the U.S. currency down from above ¥163 to around ¥157.20 as market participants thought the two allies were serious about correcting the yen’s depreciation to the level unseen in nearly four decades. The dollar has since picked up to around ¥159.30 this week. It indicated the market sentiment for the dollar hasn’t changed much, limiting yen’s purchasing power while keeping Japanese exporters’ dollar profits high.
Japan has increased purchases of crude oil and naphtha, the key material for producing plastics and resins, from the United States and other countries to bypass the Mideast Gulf. This has helped bring the month-on-month increase in the CGPI to a slower pace of 0.1% in July and a revised 0.5% in June from 1.1% in May and 2.8% in April. The increase in July was led by utilities, food and beverages (formula feeds, takeout food) and non-ferrous metals. It was largely offset by lower prices for refined petroleum products (naphtha, jet fuel), chemicals (ethylene, propylene) and farm produce (rice prices are down now after domestic supply shortages were resolved last year).
Details:
Japan July corporate goods (producer) prices +7.2% y/y (June revised to +7.3%); median forecast +7.5%
Japan July producer prices +0.1% m/m, 5th straight rise (May revised up to +0.5%); median forecast +0.6%
Japan producer annual inflation decelerates as crude oil, chemical product prices ease, offsetting higher rises in non-ferrous metals, utilities
Japan July CGPI m/m rise led by utilities, food/beverages, non-ferrous, plastics, while offset by falls in oil products/coal, chemicals
Japan July CGPI: farm produce prices y/y gain continues to slow to +3.5% from June sharply revised down to 5.4% from 7.0%
Japan July CGPI: key energy prices; crude oil/coal products +17.5% vs. June +22.8%
Japan July CGPI: non-ferrous metals +40.6% vs. +39.3% in June amid high global prices on geopolitical tensions, robust demand
Japan July CGPI import index +29.1% y/y in yen terms for 8th straight rise vs. +30.1% in June
Weak yen keeps producer prices high; rare Japan-U.S. yen-buying FX intervention in late July might have led to slight easing in July import costs
Market Consensus Before Announcement
Japan’s annual producer inflation, as measured by the Corporate Goods Price Index (CGPI), is expected to accelerate in July to its fastest pace since February 2023. The CGPI is forecast to rise for a fifth consecutive month from a year earlier, driven by continued increases in oil, metals and other commodity prices.
Ongoing geopolitical tensions in the Middle East have kept oil and commodity prices elevated while also boosting safe-haven demand for the dollar, leaving it about 7 percent stronger against the yen than a year earlier. The resulting depreciation of the Japanese currency has pushed up import costs in resource-poor Japan. These trends have intensified since the U.S. and Israel launched a joint military strike on Iran in late February.
In addition, businesses have continued to pass on higher labor costs to customers, adding to upward pressure on producer prices.
The CGPI is expected to rise 7.5 percent year on year in July — the fastest pace since February 2023, when it increased 8.4 percent — following a 7.1 percent gain in June. The largest contributors to the increase in June were non-ferrous metals, which rose 39.2 percent from a year earlier, petroleum and coal products (22.8 percent), and chemical products (14.4 percent).
On a month-on-month basis, producer prices are expected to rise 0.6 percent in July. Except for February, when the index was unchanged, the monthly CGPI has posted positive growth every month since September 2025. June's monthly increase was driven mainly by petroleum and coal products, including heavy fuel oil and kerosene, as well as utilities and plastic products. Declines in agricultural products, including rice and pork, partially offset those 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.