Japan PPI inflation data recap – persistent rise keeps focus on BoJ rate hike speculation

The data is here from earlier:

• Japan November PPI +0.3% m/m (expected +0.2%) and +3.7% y/y (expected +3.4%)

Recapping the report, and adding more:

• November Wholesale Inflation: Accelerated to 3.7% year-on-year, exceeding the forecast of 3.4%, marking the third consecutive month of increase.
• Corporate Goods Price Index (CGPI): Climbed to 124.3, its highest level on record, driven by rising costs of food, nonferrous metals, and plastics.
• Agricultural and Fishery Goods: Prices surged 31% year-on-year, fueled by soaring rice costs.
• Yen-Based Import Prices: Declined 1.2% in November, a smaller drop than October’s 2.2%, indicating the yen’s rebound hasn’t significantly reduced import costs.

Key Drivers:

• Rising raw material and labor costs are forcing companies to pass on higher prices.
• The yen remains weaker despite a partial recovery, contributing to elevated import costs.

Implications for the BOJ:

• Some analysts expect potential rate hikes at the upcoming policy meeting on December 18-19, following the earlier move to raise rates to 0.25% in July.
• Inflationary pressures challenge the BOJ’s outlook that easing import costs would alleviate household burdens and boost consumption.

Broader Context:

• The BOJ ended its decade-long ultra-loose monetary policy in March, signaling a shift toward sustainable inflation targeting.
• Governor Kazuo Ueda has hinted at further rate hikes if inflation, supported by robust wage growth and consumption, stabilizes around 2%.

This latest data highlights persistent inflationary pressures, raising questions about the sustainability of Japan’s economic recovery and the BOJ’s next policy moves.

Graphs are from the BoJ report on the PPI.

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Also out today:

• Japan’s Q4 Business Outlook Survey presents a mixed bag of results

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