Japan August Producer Inflation Eases Further 3.2% Y/Y from July’s 3.4% on Utility Subsidies, Plunging Lumber Prices

–Producer Prices Post 2nd Straight M/M Rise on Higher Fuel Costs, Sustained Rebound in Non-Ferrous Metals 

–August’s 3.2% Y/Y Rise Stays Lowest Since 1.0% in March 2021

–December 2022’s 10.6% Surge Remains Highest in 42 Years 

By Max Sato

(MaceNews) – Producer inflation in Japan eased for the eighth straight month in August, staying at an over two-year low, as the government’s utility subsidies continued to cut electricity and natural gas costs and some commodity prices remained depressed or posted slower gains compared to last year’s spike, data released Wednesday by the Bank of Japan showed.

Corporate goods prices posted their second straight monthly rise, reflecting the recent rise in global energy markets and a sustained rebound in non-ferrous metal prices.

The data also showed business import prices posted the fifth straight year-over-year decline, which is expected to ease the burden of households later this year.

The key points of CGPI:

* The corporate goods price index (CGPI) rose 3.2% on the year in August, just below the median economist forecast of a 3.3% rise (forecasts ranged from 3.1% to 3.6% gains). It was the 30th consecutive gain but remains the slowest pace of increase since 1.0% seen in March 2021, following increases of 3.4% (revised from 3.6%) in July, 4.1% (revised from 4.3%) in June, 5.1% (revised from 5.3%) in May, 5.8% (revised from 6.1%) in April in April, 7.4% in March, 8.3% in February and 9.6% in January.

* The 10.6% jump in December 2022 remains the highest in 42 years, since November 1980, when the index rose 11.8 percent during the 14-month period of double-digit percentage gains through December 1980 in the wake of the 1979 oil crisis triggered by the Iranian Revolution.

* On the month, the domestic CGPI rose 0.3% in August after rising 0.1% in July and falling 0.1% in June, dipping 0.7% in May and rising 0.3% in April, and slowing from the recent peak of a 1.6% rise hit in April 2022. It was slightly higher than the median economist forecast of a 0.2% rise (forecasts ranged from being flat to a 0.4% gain). The month-over-month increase was led by higher costs for fuels (gasoline, diesel), chemicals (benzene, etc.), non-ferrous metals (copper, etc.) and electrical equipment.

* The yen depreciated to an average ¥144.77 to the dollar in August from ¥141.21 in July during Tokyo trading hours and was much weaker than ¥130.20 in January and ¥135.24 seen a year earlier. Combined with general commodities markets, an earlier appreciation of the yen since late last year had helped lower import costs from elevated levels. 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.  

* The CGPI’s import price index posted the fifth straight decline on the year. In yen terms, the index fell 11.8% in August after dropping a revised 14.4% in July. In contract currencies, the index dipped 15.9% in August after dipping a revised 16.0% in July. The yen-based price increase peaked at a revised 49.5% in July 2022. The dollar appreciated 2.5% on the month against the yen after being unchanged in July and firming 2.8% in June, BOJ data showed.

* The producer costs for electric power, gas and water slumped 10.9% on the year in August after falling 3.6% in July, rising 4.4% in June and posting double-digit percentage gains earlier. The government began providing utilities subsidies in January and the program was originally scheduled to end in September but in the face of surging energy markets, the government has announced it would be extended throughout the year. 

* The prices for foods and beverages — a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI — rose 5.9% on the year in August after rising 6.3% in July. Those for transport equipment (150.9 weight) rose 2.6% after a 2.6% gain the previous month.

* Iron and steel prices posted a slower increase of 2.2% after rising 3.9% the previous month. Those for chemicals fell 2.8%, with the pace of decline easing from a 3.9% drop. The prices for non-ferrous metals rose 6.7% in August after rebounding 5.6% in July.

* The prices for petroleum and coal products rose 7.5% on the year in August after rebounding 1.8% in July. The prices for lumber and wood products plunged 22.1% from a year earlier for the 10th straight drop after falling 22.8% in July.

* The prices for ceramic, stone and clay products eased further to a 15.5% rise on the year in August from a 15.9% gain the previous month. Metal product prices were up 8.0% after rising 8.1%.

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Contact this reporter: max@macenews.com

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