Japan's producer price index (PPI) in November continues to reflect increasing inflation within the corporate sector, potentially complicating matters for the nation's central bank. The PPI in November rose 3.7% year-on-year, with a monthly increase of 0.3% compared to October, as reported by the Bank of Japan.
October's figure had shown a slightly lower rise of 3.6% year-on-year. The PPI measures the prices of goods and services sold by manufacturers and producers in the wholesale market to large buyers, and it differs from the consumer price index (CPI), which reflects retail prices. A significant contributor to the rise in producer prices was the increase in non-ferrous metal prices, which surged by 13.6% year-on-year in November, while agricultural, forestry, and fishery products experienced a notable increase of 31.0%.
Additionally, costs for electric power, gas, and water rose by 9.2% year-on-year. Like many countries, Japan faced inflation during and following the pandemic, driven by fiscal and monetary stimulus measures as well as supply chain disruptions. The PPI witnessed a peak increase of 10.6% year-on-year in December 2022, subsequently cooling throughout 2023, eventually falling below 1% year-on-year by early 2024.
Nevertheless, the PPI's inflation rate has been gradually increasing again through 2024, posing a challenge for the Bank of Japan. The central bank has set a 2% annual inflation target for the nation's core CPI, which excludes fresh food prices. The PPI is often seen as an indicator of potential future shifts in CPI, as retailers adjust prices to reflect changes in costs.
In response to the inflationary pressures, the Bank of Japan has incrementally raised interest rates in 2024, while also emphasizing the importance of sufficient labor demand to drive real wage growth and subsequently boost consumer spending. The Bank will convene again next week to discuss and formulate its monetary policies..