–May’s 5.1% Y/Y Rise Lowest Since 5.0% in June and May 2021
–December’s 10.6% Surge Remains Highest in 42 Years
By Max Sato
(MaceNews) – Producer inflation in Japan eased for the fifth straight month to a two-year low in May as the government’s utilities subsidies continued to cap energy costs and many commodities markets are softer on slowing global growth, particularly compared to last year’s spike, data released Monday by the Bank of Japan showed.
In its quarterly Outlook Report released in April, the BOJ board revised up its forecast for consumer inflation for fiscal 2023 ending next March to 1.8% from 1.6% projected in January while predicting that inflation will lose some steam from 3.0% in fiscal 2022 and fail to be anchored around the bank’s 2% target in a sustainable manner, averaging 2.0% in fiscal 2044 and 1.6% in fiscal 2015.
The bank will update its medium-term growth and inflation projections in the next report due on July 28.
The key points of CGPI:
* The corporate goods price index (CGPI) rose 5.1% on the year in May, below the median economist forecast of a 5.5% rise (forecasts ranged from 5.2% to 5.8% gains). It was the 27th consecutive gain but the lowest since 5.0% seen in June and May 2021, following increases of 5.9% (revised up from 5.8%) in April, 7.4% in March, 8.3% in February and 9.6% in January. December’s 10.6% rise 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 slumped 0.7% in May after rising 0.3% (revised up from a 0.2% gain) in April, edging up 0.1% in March, falling 0.3% in February and slowing from the recent peak of a 1.6% rise hit in April 2022. It was below the median economist forecast of a 0.2% drop (forecasts ranged from a 0.3% fall to a 0.1% gain). The decrease was led by lower costs for utilities (electricity, city gas), petroleum and coal products (gasoline, diesel oil, liquefied petroleum gas), non-ferrous metals and scrap and waste. The prices for farm produce, metal products and production machinery rose on the month.
* The yen depreciated to an average ¥137.39 to the dollar in May from ¥133.40 in April and remained weak compared to ¥128.68 a year earlier. Combined with more stable energy and commodities markets, an earlier appreciation of the yen since late last year has 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 rose 13.1% on the year in May but the pace of increase continued decelerating from 24.3% in April. The government began providing utilities subsidies in January and the program will continue through September.
* Iron and steel prices posted a slower increase of 9.0% after rising 10.8% the previous month. Those for chemicals now showed a 0.4% drop after a 1.9% increase. The prices for non-ferrous metals fell 2.0% in May after falling 2.5% in April.
* The prices for petroleum and coal products fell 1.8% on the year in May after dipping 6.6% in April and turning negative in January. The prices for lumber and wood products plunged 19.8% from a year earlier for the seventh straight drop after falling 18.2%.
* Ceramic, stone and clay products eased to a 14.6% rise on the year in May from a 15.7% gain the previous month. Metal product prices were up 11.5%, off slightly from 12.0%.
* The prices for foods and beverages — a category with a high weighting of 144.6 out of 10,000 for the domestic CGPI — rose 7.9% on the year in May after rising 7.5% in April. Those for transport equipment (150.9 weight) rose 3.4% after a 3.9% gain the previous month.
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