Japan data for wholesale-level goods inflation is disappointing, falling for the month vs. the small rise that was expected.
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The Producer Price Index (PPI) in Japan is also known as the Corporate Goods Price Index (CGPI)
- its a measure of the average change over time in the selling prices received by domestic producers for their output
- is calculated by the Bank of Japan
Unlike the Consumer Price Index (CPI), which measures the price change that consumers see for a basket of goods and services, the CGPI focuses on the change in the prices of goods sold by companies.
The PPI reflects some of cost pressures faced by producers
- its based on a basket of goods that represents the range of products produced within the Japanese economy, including items such as:
- raw materials like metals and chemicals
- semi-finished goods
- and finished products
- different weights are assigned to each category within the index based on its contribution to the overall economy.
- it does not account for the quality improvements in goods and services over time, which might lead to overestimation of inflation
- additionally, it reflects only the prices of domestically produced goods, leaving out the impact of imported goods
The PPI can be used as a guide to inflationary pressures in the economy:
- If producers are facing higher costs, they may pass these on to consumers, leading to higher consumer prices.
