Japan PPI inflation sticks to near 41-year high in November

By Ambar Warrick

Investing.com-- Japan’s producer price inflation remained pinned at a near 41-year high in November, data showed on Monday, as elevated raw material prices and a weakened yen pushed up price pressures faced by businesses.

The country’s producer price index (PPI) rose to an annualized 9.3% in November from 9.1% in the prior month, preliminary data from the Bank of Japan showed. The reading was higher than expectations of 8.9%.

On a monthly basis, PPI inflation grew 0.6% in November, remaining steady from the prior month but beating estimates for growth of 0.5%.

While the reading was slightly lower than a peak of over 10% seen earlier this year, it also signaled that PPI inflation now appeared to be inching back toward the 41-year high hit in October.

Electricity, gas and water prices were the biggest contributors to the higher-than-expected PPI data, the Bank of Japan said in a release, as were food and beverage products. Still, import price inflation of major commodities appeared to have weakened slightly in November from the prior month.

The Japanese economy is facing significant headwinds from high inflation this year, given that most producers pass on increased costs to their customers, which in turn pushes up the country’s consumer price index (CPI).

CPI inflation also surged to an over 40-year high this year, heralding more pressure on consumer spending - a major driver of economic growth - in the fourth quarter. The Japanese economy unexpectedly shrank in the third quarter, although strong capital spending saw the scope of the contraction being revised lower.

A weakening yen has also contributed heavily towards inflation this year. The currency at one point was trading at its weakest level in over 30 years against the dollar, as a gap between local and U.S. interest rates widened.

The Bank of Japan (BoJ) has largely stuck to its ultra-dovish monetary policy despite surging inflation this year - a trend that has weighed heavily on the yen.

Still, the Japanese currency has benefited in recent months from speculation over a potential policy shift by the BoJ.