| Consensus | Consensus Range | Actual | Previous | Revised | |
| Month over Month | 0.0% | -0.5% to 0.4% | -0.2% | 0.1% | 0.4% |
| Year over Year | 7.4% | 6.9% to 7.8% | 7.6% | 7.2% | 7.7% |
Highlights
Producer inflation in Japan remained elevated in August, up 7.6% on the year, after rising 7.7% in July (revised up sharply from 7.2%) and 7.4% in June (initially 7.3%). The lingering Mideast conflict has kept petroleum and petrochemical product costs high and artificial intelligence projects have boosted memory chip prices globally. The yen remains relatively weak despite a recent pickup amid market talk of imminent U.S.-Japan dollar-selling intervention, leaving imports expensive, although the pace of increase in import prices eased for the first time in nine months.
The revised 7.7% increase in the corporate goods price index in July is the highest since 8.4% recorded in February 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.
Inflationary pressures moderated further on the month to post a 0.2% drop in August for the first decrease in 12 months following increases of 0.4% in July (revised from +0.1%), 0.5% in June, 1.1% in May and 2.8% in April. Rice prices are now under year-earlier levels after domestic supply shortages were resolved last year. The month-on-month fall was led by lower prices for utilities, farm produce (polished rice, pork and dried whitebait) and fuels.
Bank of Japan data showed the dollar averaged at ¥158.74 during Tokyo trading hours in August, down from ¥162.55 in July but still well above a year-earlier level of ¥147.67. Dollar-denominated securities continue to attract investors with higher returns compared to yen assets. At its next policy meeting on Sept. 17-18, the BOJ is widely expected to follow up on its June rate hike to raise the policy interest rate to 1.25% from 1% amid growing risks to inflation but the level would be still well below the target range for the U.S. federal funds rate at 3.5% to 3.75%.
Details:
Japan Aug corporate goods (producer) prices +7.6% y/y (July revised up to +7.7% from +7.2%); median forecast +7.4%
Japan Aug producer prices -0.2% m/m, 1st fall in 12 months (July revised up to +0.4% from +0.1%); median forecast +0.0%
Japan Aug CGPI m/m fall led by utilities, farm products, fuels
Japan producer inflation remains elevated, led by petroleum products, chemicals, plastics amid Iran war, non-ferrous metals due to strong demand
Japan Aug CGPI: farm produce prices y/y gain continues to slow to +2.5% from +4.7% in July
Japan Aug CGPI: key energy prices; crude oil/coal products +14.7% vs. July +17.6%
Japan Aug CGPI: non-ferrous metals +43.3% vs. +40.7% in July
Japan Aug CGPI import index +24.8% y/y in yen terms for 9th straight rise vs. July +29.3%; pace of increase eases as yen firms vs. dollar
Market Consensus Before Announcement
Japan’s producer inflation, as measured by the Corporate Goods Price Index (CGPI), is expected to pick up momentum in August amid rising oil and chemical prices and a lack of positive developments in the geopolitical situation in the Middle East. Corporations also appeared to be passing higher labor and logistics costs on to producer prices.
The yen’s weakness has also been pushing up producer prices. The CGPI import index rose 29.1 percent on the year in July, marking an eighth straight year-on-year increase, with the index posting gains of more than 20 percent for the fourth consecutive month.
The annual CGPI is projected to rise 7.4 percent year on year in August — the fastest pace since February 2023, when it increased 8.4 percent — following a 7.2 percent gain in July and a 7.3 percent gain in June. The largest contributors to the increase in July were non-ferrous metals, petroleum and coal products, information and communication equipment, and chemical products.
On a month-on-month basis, producer prices are expected to be flat in August after rising 0.1 percent a month earlier. In July, gains were led by utilities, food and beverages, and non-ferrous metals, while declines were mainly driven by oil products, such as naphtha and kerosene, and chemical products, including ethylene and polypropylene.
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.