–December’s Flat Annual Rate Remains Lowest Since 0.9% Drop in February 2021
–Producer Prices Up 0.3% M/M on Higher Prices for Fuels, Electronic Parts/Devices, Farm Produce
By Max Sato
(MaceNews) – Producer inflation in Japan moderated for the 12th straight month to post zero growth on year in December, following 33 months of increase including a 0.3% gain in November, as government subsidies continued to suppress utility costs and prices for lumber and steel remained below year-earlier levels amid slower global demand, data released Tuesday by the Bank of Japan showed.
The corporate goods price index rose an above-forecast 0.3% on the month for the second consecutive rise after rising 0.3% (revised up from a 0.2% rise) in November. The government scaled back subsidies to refineries, pushing up the prices for gasoline and fuels. By contrast, the appreciation of the yen on expectations for an end to the Bank of Japan’s negative short-term interest rate target helped lower the import costs for some materials.
Producer prices rose 4.1% in 2023 after rising 9.8% in 2022 and 4.6% in 2021.
The Key points form the CGPI data:
* The 10.6% jump in December 2022 was 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 December after rising 0.3% in November and falling 0.3% in October. It has eased from the recent peak of a 1.6% rise hit in April 2022. The latest figure is above the median economist forecast of being flat (forecasts ranged from a 0.7% drop to a 0.2% gain). The increase was led by higher costs for refined petroleum products (heavy fuels, gasoline and diesel), electronic parts and devises (connecting components and printed circuit boards) and farm produce (beef, pork and polished rice). The prices for metals, chemicals and non-ferrous metals fell.
* The CGPI’s import price index posted the ninth straight decline on the year but the pace of decrease was the slowest in eight months. In yen terms, the index fell 4.9% in December after dipping a revised 6.4% in November. In contract currencies, the index dipped 9.5% after falling a revised 10.1%. The yen-based import cost increase peaked at 49.5% in July 2022.
* The yen firmed to an average ¥144.07 to the dollar in December during Tokyo trading hours from ¥149.83 in November but it was still much weaker than ¥130.20 in January 2023. The appreciation of the yen in early parts of 2023 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 producer costs for electric power, gas and water slumped 27.6% on the year in December for the sixth straight drop after falling 24.5% in November and posting double-digit percentage gains earlier. The government has extended its utilities subsidies until April 2024. The program aimed at easing the pain of both households and businesses was launched in January 2023 and it was originally scheduled to be phased out at the end of September that year.
* The prices for lumber and wood products fell 15.5% from a year earlier for the 13th straight drop after falling 16.5% the previous month. Iron and steel prices fell 3.4% after falling 3.9% the previous month. Those for chemicals dipped 1.5% following a 1.8% drop.
* The prices for foods and beverages — a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI — rose 4.4% on the year in December after rising at the same pace in November. Those for transport equipment (150.9 weight) rose 1.9% after a 2.2% gain the previous month.
* The prices for non-ferrous metals rose 4.3% on year in for the sixth straight increase after rising 4.6%. Those for petroleum and coal products also posted the sixth increase in a row, up 4.6%, accelerating from a 3.7% rise.
* The prices for ceramic, stone and clay products eased further to a 11.6% rise on year in December from a 12.3% gain the previous month. Metal product prices were up 4.5%, also slowing from a 5.6% increase.