—Producer Inflation Still Well Below Recent Peak of 10.6% in December 2022
–Producer Prices Up 0.3% M/M on Non-Ferrous Metals, Fuels, Farm Produce
By Max Sato
(MaceNews) – Producer prices in Japan rose a solid 0.9% on the year in April, as expected, reflecting concerns over global copper supply, rising import costs amid the weak yen and the already waned base-year effect of utility subsidies, data released Tuesday by the Bank of Japan showed. It followed increases of 0.9% (revised up from 0.8%) in March and 0.8% (revised from 0.7%) in February.
The 38th straight year-over-year increase was led by non-ferrous metals, fuels and production equipment but the pace of increase is far below the recent peak of 10.6% reached in December 2022. Slower price gains were seen in food and beverages, metal products and transport equipment. The downward pressure still comes from utilities, which fell 19.7% in April (19.1% in March), and the prices for lumber and steel also remain below year-earlier levels.
On the month, the corporate goods price index (CGPI) rose 0.3%, just under the median forecast of a 0.4% rise and following a 0.2% gain in March. It has eased from the recent peak of a 1.6% rise hit in April 2022. The increase in April was led by non-ferrous metals (copper), refined petroleum products (naphtha, heavy fuels and gasoline), iron and steel (zinc-coated steel sheets) and farm produce (pork and chicken eggs).
The CGPI’s import price index in yen terms jumped 6.4% on year in April, which remains the highest since the 9.4% rise in March 2023 and follows a 1.4% rise in March. In contract currencies, the index dropped 4.3% after falling 6.9%. The yen-based import cost increase peaked at 49.5% in July 2022.
The yen depreciated further to an average ¥153.43 against the dollar in April during Tokyo trading hours from ¥149.63 in March. The yen’s relative strength in a range of ¥130 to ¥134 in the first four months of 2023 helped lower import costs, which slumped as much as 14.7% in yen terms last July.
In the latest development, the dollar surged to a 34-year high of just above ¥160 on April 29 on expectations that interest rates in Japan will remain low and a U.S. rate cut is unlikely for now, but suspected dollar-selling intervention by the Ministry of Finance pushed the U.S. currency below ¥155. The MOF is also believed to have stepped into the forex market on May 2, when the dollar dipped to around ¥153 from ¥157. The Japanese government is estimated to have bought a total of ¥9 trillion on those two days. Previously, the dollar briefly surged to a 32-year high of ¥151.94 in October 2022 but Japan’s second wave of massive yen-buying forex intervention pushed it down to a low of ¥143.55 in the same month.
Among the key factors still taming producer prices, the costs for electric power, gas and water for businesses fell 19.7% on the year in April for the 10th straight drop after falling 19.1% in March.
The prices for lumber and wood products fell 4.1% from a year earlier for the 17th straight drop but moderated further from a 6.9% drop the previous month. Iron and steel prices fell just 0.6% after slipping 3.1% the previous month. Those for chemicals edged down 0.6% following an upwardly revised 0.2% rise.
The prices for foods and beverages — a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI — rose 2.9% on the year in April, slowing further from a 4.0% rise in March. Those for transport equipment (150.9 weight) rose 1.7% after a 2.1% gain the previous month.
The prices for non-ferrous metals jumped 11.7% on year in for the 10th straight increase after a 5.8% rise. Those for petroleum and coal products also posted the 10th increase in a row, up 5.3%, following a 5.3% rise. The prices for ceramic, stone and clay products eased further to a 6.6% rise on year from a 9.9% gain the previous month. Metal product prices were up 2.9% after rising 3.4%.