Japan’s producer inflation slows for first time in eight months

INFLATION as measured by Japan’s producer prices slowed for the first time in eight months as the cost of energy-related items fell.

The measure of input prices for Japanese firms gained 2.5 per cent from a year earlier in August, the Bank of Japan (BOJ) reported on Thursday (Sep 12). The result missed economists’ expectations of a 2.8 per cent gain. From the prior month, prices dropped by 0.2 per cent, the first decline in 10 months.

The report showed a 2.6 per cent increase in yen-denominated costs for both imported and exported materials, slowing sharply from the readings in July. The yen had strengthened against the US dollar last month, easing cost pressure for businesses in yen terms. Input costs for oil and coal items declined 4 per cent from a year ago.

The slowdown in producer inflation comes as economists largely expect the BOJ to keep its policy interest rate unchanged next week. Central bank officials see little need to raise the rate as they are still monitoring lingering volatility in financial markets and the impact of the July hike, according to sources familiar with the matter.

Japan is set to report on its August national consumer inflation figures right before the BOJ’s policy decision on Friday. While companies may be seeing slower price increases, economists currently expect core consumer inflation to accelerate to 2.9 per cent from 2.7 per cent. BLOOMBERG