Japan Producer Prices Fall 0.2% in August but Remain Elevated From a Year Earlier

Japan’s producer prices declined in August after rising in June and July, but business-to-business goods prices remained 7.6% above their level a year earlier. The Bank of Japan’s Producer Price Index fell 0.2% from July to 136.1 on a 2020=100 basis.

The annual increase eased only slightly from a revised 7.7% in July. The BOJ also revised July’s monthly increase to 0.4% and the index level to 136.4, up from the preliminary readings of 0.1% and 135.8 released last month. August therefore brought a monthly pullback while producer-price inflation remained elevated on a year-over-year basis.

Energy and utilities led the monthly decline

The BOJ’s August Corporate Goods Price Index report shows that electric power, gas and water made the largest negative contribution to the headline monthly change, subtracting 0.14 percentage point. Gas supply and electricity were the main items in that group. The producer index excluding extra charges for summer electricity fell 0.1% from July, compared with the 0.2% decline in the headline index.

Agriculture, forestry and fishery products also subtracted 0.12 percentage point from the monthly change. The BOJ identified polished rice, pork, and cooked and dried whitebait among the items behind that decline. Petroleum and coal products contributed another negative 0.12 percentage point, with heavy fuel oil, jet fuel oil and lubricating oil among the listed products. Scrap and waste prices accounted for a further 0.04-point drag.

The monthly decline was not broad across every major group. Nonferrous metals added 0.10 percentage point, supported by items including copper, aluminum alloy die castings and unwrought gold. Beverages and foods added 0.04 point, as did plastic products. Metal products, information and communications equipment, and iron and steel provided smaller positive contributions.

That mix matters because the headline number can move for different reasons from month to month. August’s fall reflected weakness in several energy and commodity-linked areas, but some materials and manufactured goods continued to rise. One negative monthly reading does not by itself erase the much larger increase accumulated over the previous year.

Annual producer inflation stayed above 7%

The 7.6% annual increase was only one-tenth of a percentage point below July’s revised 7.7% gain. June was revised to 7.4%, leaving the annual rate above 7% for three consecutive months. The August index of 136.1 also remained 36.1% above the 2020 base level used for the series.

Producer prices and consumer prices measure different stages of the economy, so the two should not be treated as interchangeable inflation gauges. The latest nationwide Consumer Price Index from Japan’s Statistics Bureau showed an all-items increase of 1.9% from a year earlier in July. The contrast does not mean producer-price gains will automatically pass through to households, but it shows that price pressure has been much stronger in the goods market between businesses than in the headline consumer measure.

The Bank of Japan has been focusing on that pass-through question. Its July 2026 Outlook for Economic Activity and Prices devoted a section to the background and impact of upward pressure in business-to-business transactions. The central bank projected that year-over-year consumer inflation excluding fresh food would be clearly above 2% from the second half of fiscal 2026 before moving toward around 2% through fiscal 2028, while also pointing to risks from crude oil prices, foreign-exchange developments and firms’ price-setting behavior.

In the same outlook, Policy Board members’ median forecasts put the increase in the consumer price index excluding fresh food at 2.5% for fiscal 2026, 2.4% for fiscal 2027 and 2.0% for fiscal 2028. Those projections are separate from the August producer-price release, but they explain why the BOJ continues to watch business costs and the pace at which firms pass them through.

Import prices eased in August but remained high from a year earlier

The external-price indexes in the same BOJ report showed a similar split between monthly easing and elevated annual readings. On a contract-currency basis, Japan’s Import Price Index fell 1.0% from July. Petroleum, coal and natural gas accounted for a 1.18-percentage-point negative contribution, with crude petroleum, naphtha and liquefied petroleum gas among the items cited by the central bank.

Even after the monthly decline, import prices on a contract-currency basis were 16.7% higher than a year earlier. On a yen basis, the import index fell 3.0% during August but remained 24.8% above its year-earlier level. The softer August reading for imported energy and raw materials therefore did not erase the large annual increase already embedded in import costs.

Export prices moved in the opposite direction on a contract-currency basis, rising 0.6% for the month and 11.1% from a year earlier. Metals and related products made the largest positive monthly contribution, followed by other primary products and manufactured goods and then electric and electronic products. On a yen basis, export prices fell 0.7% from July while remaining 17.9% higher year over year.

The August data arrive just before the BOJ’s next scheduled Monetary Policy Meeting on September 17 and 18. The Bank currently guides the uncollateralized overnight call rate at around 1.0% and has said future policy adjustments will depend on developments in economic activity, prices and financial conditions. August’s 0.2% monthly decline provides one sign of near-term easing in producer costs, but the 7.6% annual increase and still-high import-price readings keep the broader inflation backdrop firmly in view.