Japan December Producer Prices Ease on Dip in Energy, Commodities Markets

— BOJ’s Corporate Goods Price Index Y/Y Rise Still at Over 4-Decade High

— CGPI Dips M/M on Sharp Drop in Fuels, Easing in Non-Ferrous Metals

By Max Sato

(MaceNews) – Producer prices in Japan unexpectedly slipped on the month in December, reflecting a recent easing in energy and commodities markets, but the year-over-year increase, although slowing, remained at an over four-decade high amid supply bottlenecks and reopening demand, data released Friday by the Bank of Japan showed.

High upstream inflation is unlikely to boost consumer prices in Japan, which are expected to rise gradually to around 1% this year, still well below the Bank of Japan’s 2% inflation target, which has never been achieved since it was set in early 2013. The stubborn deflationary mindset and growth uncertainty is keeping firms generally cautious about raising prices and wages.

The key points of domestic CGPI:

* The corporate goods price index (CGPI) rose 8.5% on the year in December, marking the 10th consecutive gain after rising 9.2% in November (revised up from an initial 9.0%), but coming in weaker than the median economist forecast of an 8.8% rise. The latest gains are the largest 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 has also kept producer import costs high, which continued posting double-digit percentage gains on the year for nine months in a row in December, in both yen and contract currencies.

* The prices for petroleum and coal products showed a marked slowdown in year-on-year gains to 36.6% in December from 49.6% in November. Those for iron and steel gained 25.5%, little changed from 25.2% the previous month while non-ferrous metal prices rose 26.9%, slowing from a 33.1% rise. The prices for lumber and wood products soared 61.3% after 59.5% in November. 

* On the month, the domestic CGPI fell 0.2% in December after rising 0.7% (revised up from 0.6%) in November, posting the first drop in 13 months. The decrease was due to lower prices for refined petroleum products (gasoline, diesel and kerosene), non-ferrous metals, scrap and waste and chemicals. Costs for electric power, farm products and iron and steel continued rising.

* For the whole of 2021, producer prices gained 4.8% after slipping 1.2% in 2020 and edging up 0.2% in 2019.