—Producer Prices Mark 35th Straight Y/Y Gain but Recent Figures Stay Lowest Since 0.9% Drop in February 2021
–Producer Prices Flat Month on Month; Firmer Prices for Utilities, Electric Machines Offset Lower Costs for Farm Produce, Fuels
By Max Sato
(MaceNews) – Producer inflation in Japan rose 0.2% on the year in January, coming in higher than the consensus forecast of being flat but staying on an easing trend as government subsidies continued to cap utility costs and prices for lumber, steel and chemicals remained below year-earlier levels amid slower global demand, data released Tuesday by the Bank of Japan showed.
December’s unchanged reading was revised up to a 0.2% rise, resulting in a 35th consecutive year-over-year increase in January amid firmer prices for fuels, production machinery and electronic equipment. The pace of increase has slowed from 0.5% in November, 1.1% in October, 2.2% in September and a recent peak of 10.6% seen in December 2022.
On the month, the corporate goods price index (CGPI) was unchanged, as expected, after rising 0.3 percent in the previous two months. Higher costs for utilities, electric machinery (monitoring and control equipment) and metal products offset lower prices for farm produce, refined petroleum products (heavy fuels for boilers, naphtha and jet fuel) and production equipment (metal molds).
The key points of CGPI:
* On the month, the domestic CGPI was unchanged in January after rising 0.3% each in December and November and falling in the previous two months. It has eased from the recent peak of a 1.6% rise hit in April 2022. The latest figure is line with the median economist forecast of being flat (forecasts ranged from a 0.1% drop to a 0.1% gain).
* The CGPI’s import price index posted the 10th straight decline on the year but the pace of decrease was the slowest in nine months, exerting less downward pressures on overall producer prices. In yen terms, the index fell 0.2% in January after falling 4.9% in December. In contract currencies, the index dipped 8.8% after falling a revised 9.4%. The yen-based import cost increase peaked at 49.5% in July 2022.
* The yen depreciated to an average ¥146.57 to the dollar in January during Tokyo trading hours from ¥144.07 in December as speculation for an imminent lifting of the BOJ’s negative overnight interest rate had faded in light of cautious official comments and the powerful earthquake that jolted the northwestern region of Hokuriku in the new year. Earlier, the yen’s relative strength in a range of ¥130 to ¥134 in the first four months of 2023 helped lower import costs. 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.
* Among the key factors taming producer prices, costs for electric power, gas and water for businesses slumped 27.7% on the year in January for the seventh straight drop after falling 27.6% in December 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.
* Prices for lumber and wood products fell 11.7% from a year earlier for the 14th straight drop after falling 15.5% the previous month. Iron and steel prices fell 3.3% after slipping 3.4% the previous month. Those for chemicals dipped 1.1% following a 1.5% drop.
* Solid gains continue in some categories. 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 January after rising 4.5% in December. Those for transport equipment (150.9 weight) rose 2.2% after a 2.0% gain the previous month.
* Prices for non-ferrous metals rose 3.2% on year in for the seventh straight increase after rising 4.4%. Those for petroleum and coal products also posted the seventh increase in a row, up 6.6%, following a 4.6% rise.
* Prices for ceramic, stone and clay products eased further to a 10.9% rise on year in January from a 11.7% gain the previous month. Metal product prices were up 4.1%, also slowing from a 4.9% increase.