Japan’s input inflation flatlines for weakest result since 2021
JAPANESE input prices were unchanged last month from a year earlier, the weakest showing in almost three years as the yen’s recent gains helped cap import costs.
The December producer price index, a measure of input prices for firms, was flat versus the same period in 2022, the first month without an advance since February 2021 and the 12th consecutive month in which price growth decelerated. The reading was a tad stronger than the consensus call for a 0.3 per cent decline. From the prior month, prices rose 0.3 per cent, outpacing expectations of no change.
The figure was in line with the Bank of Japan’s (BOJ) view that inflationary pressure will ease for some time before picking up again. Data on Friday (Jan 19) are expected to show that growth in consumer prices excluding fresh food, the core gauge, slowed to 2.3 per cent in December. Tokyo inflation, a leading indicator for the national trend, weakened last month to the slowest pace in over a year.
BOJ board members set to gather next week are likely to discuss cutting their forecast for core CPI in the fiscal year from April to around 2.5 per cent from 2.8 per cent due to a drop in oil prices, sources familiar said last week. The yen traded around 143.80 to the US dollar in December, compared with 149.81 in November.
Still, BOJ governor Kazuo Ueda has voiced confidence that Japan is emerging from the deflationary mindset that weighed on spending and investment for three decades. In a Dec 25 speech, the governor said he’s seen evidence that medium- to long-term inflation expectations have shifted, “and a view that changes in the wage and price situation are not temporary appears to be gradually becoming widespread”.
While most economists expect the BOJ to stand pat at its meeting concluding Jan 23, more than two-thirds of those surveyed by Bloomberg in December still expect the bank to end its negative rate by April.
The slowdown in last month’s PPI was partially due to lumber and utility costs continuing their declines, Tuesday’s report showed. BLOOMBERG
Share with us your feedback on BT's products and services
