Headline: Japan’s Producer Prices Ease to 2.7% as Cheaper Imports Temper Costs
Japan’s wholesale inflation moderated in October, offering a mixed signal for the Bank of Japan as it gauges whether price gains are increasingly driven by domestic demand. Producer prices rose 2.7% year over year, edging down from a revised 2.8% in September. On a monthly basis, the Producer Price Index advanced 0.4%, slightly stronger than market expectations.
The latest figures reflect relief from import costs, with the import price index down 1.5% from a year earlier. Even so, the annual PPI reading came in above the 2.5% consensus, indicating that underlying cost pressures persist despite easing external inputs. The Corporate Goods Price Index, the BOJ’s preferred gauge of pipeline inflation, remains a key barometer for the outlook of consumer prices.
Policymakers continue to tread carefully. While consumer inflation has held above the BOJ’s 2% target for an extended period, Governor Kazuo Ueda has reiterated that any policy normalization must be underpinned by sustainable, demand-led inflation and broad-based wage growth. He also noted the central bank stands ready to respond if long-term yields diverge from economic fundamentals. In currency markets, the yen has pulled back from the 155 per dollar level but remains sensitive to policy signals.
Key Points: – Japan’s PPI rose 2.7% y/y in October (vs. 2.8% in September), and 0.4% m/m (expected 0.3%). – Import prices fell 1.5% y/y, helping cool wholesale inflation. – The outcome topped forecasts (2.5% y/y), suggesting persistent underlying price pressures. – The CGPI remains a leading indicator for consumer inflation monitored by the BOJ. – BOJ Governor Ueda emphasized demand-driven inflation and wage gains as prerequisites for policy shifts. – USD/JPY eased from the 155 level, reflecting continued sensitivity to monetary policy cues.
