Japan PPI (August) -0.2% m/m (expected +0.0%) and +2.5% y/y (expected +2.8%)

-0.2% m/m for a miss

• expected 0.0%, prior 0.3%

2.5% y/y, also a miss

• expected 2.8%, prior 3.0%

Falling m/m wholesale inflation and lower than previous y/y. The rising yen may well have played a role in these results – check out the graph on the right, the import index.

At the margin these data are a slight negative for the yen.

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The Producer Price Index (PPI) in Japan is also known as the Corporate Goods Price Index (CGPI)

• its a measure of the average change over time in the selling prices received by domestic producers for their output
• is calculated by the Bank of Japan

Unlike the Consumer Price Index (CPI), which measures the price change that consumers see for a basket of goods and services, the CGPI focuses on the change in the prices of goods sold by companies.

The PPI reflects some of cost pressures faced by producers

• its based on a basket of goods that represents the range of products produced within the Japanese economy, including items such as:
  • raw materials like metals and chemicals
  • semi-finished goods
  • and finished products
  • different weights are assigned to each category within the index based on its contribution to the overall economy.
• it does not account for the quality improvements in goods and services over time, which might lead to overestimation of inflation
  • additionally, it reflects only the prices of domestically produced goods, leaving out the impact of imported goods

The PPI can be used as a guide to inflationary pressures in the economy:

• If producers are facing higher costs, they may pass these on to consumers, leading to higher consumer prices.

This article was written by Eamonn Sheridan at www.forexlive.com.