The pace of gains in Japan¡¯s producer prices decelerated more than expected in October to the weakest in over two years, supporting the Bank of Japan¡¯s view that inflation is cooling.
A measure of input prices for Japanese firms rose 0.8% from a year earlier, the slowest pace of growth since gains resumed in March 2021, the Bank of Japan reported Monday. The data compared with economists¡¯ expectations of a 0.9% increase year-on-year. From the prior month, prices fell 0.4%, compared to the consensus view of a 0% change.
The data came out weaker than the 2.8% gain in core consumer prices measured in September, meaning inflation for materials was slower than the most recent reading of the central bank¡¯s benchmark gauge for the second consecutive month. The October data for consumer inflation is due on Nov. 24.
The slowdown of producer-side price growth this year is in line with the BOJ¡¯s view that inflation is moderating and needs close monitoring to see if the trend will last. Input prices gains below the BOJ¡¯s 2% price target suggest that inflation cannot persist above the target on a cost-push basis alone.
The report showed a continued sharp decline in lumber and utilities costs compared to the previous year. Still, the yen¡¯s recent slide beyond the ?150 level against the dollar may renew upward moves in import costs, another factor the the central bank will need to keep a close eye on.
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