–December’s 10.5% Y/Y Rise Remains Highest in 42 Years
By Max Sato
(MaceNews) – Producer inflation in Japan continued to ease in February as the government is trying to cap sharp increases in energy costs for both households and businesses while fuel and lumber prices fell at a faster pace amid slowing global demand, data released Friday by the Bank of Japan showed.
Bank of Japan policymakers expect inflation to wane this year after the recent spike boosted by high import costs.
The key points of CGPI:
* The corporate goods price index (CGPI) rose 8.2% on the year in February, coming softer than the median economist forecast of an 8.5% rise (forecasts ranged from 7.3% to 8.6% gains). It was the 24th consecutive gain following increases of 9.5% in January, 10.5% in December, 9.9% (revised from 9.8%) in November and 9.7% in October. The annual rate of 10.5% in December remains a 42-year high. It is the highest 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.
* The relatively weak yen at around Y133 to the dollar in February, compared to Y115 a year earlier, is keeping import costs high, although they are well below the peak seen last year. The year-over-year increase in the CGPI’s import price index in yen terms was 14.6% in February (16.9% in January), higher than 3.1% (6.4% previously) in contract currencies. The pace in yen-based price increase continued to slow from a 49.2% surge in July 2022. The dollar appreciated 1.8% against the yen on the month in February after depreciating 3.5% in January, 5.2% in December and 3.2% in November and rising 2.9% in October, BOJ data showed. The dollar briefly surged to a 32-year high of Y151.94 in October but Japan’s second wave of massive yen-buying forex intervention pushed it down to a low of Y143.55 in the same month.
* Producer costs for electric power, gas, and water — the category that is also driving consumer prices higher – rose 33.9% on the year in February, but the pace of increase continued decelerating from 49.1% in January.
* Iron and steel maintained a double-digit percentage gain but posted a slower increase of 18.5% after rising 18.9% the previous month. Those for chemicals continued slowing to a 4.7% rise from a 5.7% increase. The prices for non-ferrous metals rose 5.3% in February, also decelerating from a 6.0% gain in January.
* The year-on-year change in the prices for petroleum and coal products fell 4.7% in February after turning negative with a 0.3% dip in January. The prices for lumber and wood products slumped 10.7% from a year earlier for the fourth straight drop after falling 8.7%.
* By contrast, the upward pressure on the prices for ceramic, stone, and clay products lingered, up 12.4% on the year in February, after rising at the same pace the previous month. Metal product prices were up 13.0% in both February and January.
* The prices for the beverages and foods — a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI — rose 7.6% on the year in February after rising 7.8% in January. Those for transport equipment (150.9 weight) rose 4.7%, up slightly from a 4.6% gain the previous month.
* On the month, the domestic CGPI fell 0.4% in February after being flat in January and slowing from the recent peak of a 1.6% rise hit in April 2022. It was just below the median economist forecast of a 0.3% drop (forecasts ranged from a 1.3% fall to being unchanged). The decrease was led by lower costs for utilities (electricity, gas supply), fuels (gasoline, jet fuel and diesel) and lumber and wood products.