–Weak Yen Continues Boosting Import Costs for Producers
By Max Sato
(MaceNews) – Producer inflation in Japan unexpectedly accelerated in September to just shy of a 41-year high hit in April, led by double-digit percentage gains continuing in utilities, nonferrous metals, iron and steel, chemicals and fuels while there was an uptick in highly weighted items of food and beverages and transport equipment, data released Thursday by the Bank of Japan showed.
The annual rate for lumber prices slipped to a single-digit rise in September from double-digit gains in recent months but the rate of increase in pulp and paper, plastics, and production machinery accelerated.
BOJ policymakers are expected to maintain their easing stance for now. They do not expect inflation to be anchored around its stable 2% target any time soon after what they see as a temporary spike to around 3% this year, and that conviction is unlikely to change when they release their updates in the quarterly Outlook Report later this month.
The key points of domestic CGPI:
* The corporate goods price index (CGPI) rose 9.7% on the year in September, coming in well above the median economist forecast of an 8.8% rise. It was the 19th consecutive gain after rising 9.4% (revised from 9.0%) in August, 9.1% (revised from 9.0%) in July, 9.5% (revised from 9.4%) in June, 9.2% in May and 9.8% in April. The April figure remains the highest since December 1980, when the index jumped 10.4% for the 14th straight month of double-digit percentage gains in the wake of the 1979 oil crisis triggered by the Iranian Revolution.
* The depreciation of the yen continues exerting upward pressure on already high import costs at producer levels, which also marked the 19th straight year-on-year rise. The increase in yen terms was larger at 48.0% in September (43.2% in August), compared to 21.0% (22.3% previously) in contract currencies. The pace in yen-based price increase was slower than a revised 49.2% jump in July.
* The producer costs for electric power, gas and water, the category that is also driving consumer prices higher, surged 38.8% on the year in September, up from 34.5% in August. The prices for non-ferrous metals rose 11.8% in September, up from 10.4% in August, although the pace was higher a few months earlier. Those for chemicals gained 10.4%, up slightly from 10.1% the previous month. The prices for plastics also picked up the pace, up 9.2% in September versus 8.2% in August, and so did those for production machinery, up 4.5% after 3.3% the previous month.
* The prices for food and beverages, which has a high weighting of 144.6 out of 10,000 for the domestic CGPI, rose 6.4% on the year in September, up slightly from 6.2% in August. Those for transport equipment (150.9 weight) rose 3.9% versus 3.8% the previous month.
* The prices for lumber and wood products showed a notable easing in September to an 8.2% rise from 20.0% in August and much higher rates seen the previous months. Those for iron and steel rose 26.1%, easing from 27.2% the previous month. The prices for petroleum and coal products rose 14.7% in September, slowing from 15.6% in August to match 14.7% in July and easing sharply from previous gains.
* On the month, the domestic CGPI rose 0.7% in September after rising
0.4% (revised from 0.2%) in August, 0.7% in July and 1.0% (revised from 0.9%) in June, being flat in May and rising 1.5% in April. It is above the median economist forecast of a 0.3% rise. Utilities (electricity, gas), scrap and waste, nonferrous metals and farm products led the increase.
* Export producer prices in contract currencies fell 0.5% on the month in September for the third straight monthly decline after falling 1.2% in August, slipping 0.1% in July and rising 0.1% in June. Import producer costs edged up 0.2% after dipping 0.9% in August for the first month-on-month drop in seven months and rising 1.3% in July and 2.0% in June.