Companies Pass Higher Costs to Consumers
Japan’s producer price index (PPI) hit a record high for the third consecutive year in 2024, as companies passed on rising material and labor costs to their prices, according to a Bank of Japan (BOJ) report released on Thursday.
The PPI, which measures the costs of goods traded between companies, rose 2.3% from the previous year to 122.6 (based on 2020 as the reference year). This marks the fourth straight annual increase in producer prices, signaling persistent inflationary pressures despite government efforts to stabilize costs.
Price Increases Across Key Sectors
By category, several industries saw substantial price increases:
- Nonferrous metals surged 12.2%, driven by high market prices for copper and aluminum.
- Agricultural, forestry, and fishery goods jumped 9.7%, largely due to rising rice prices.
- Food and beverages recorded a 2.6% increase, reflecting higher material costs.
However, some sectors saw price declines:
- Lumber and wood products fell 4.0%, following a slowdown in housing demand.
- Electricity, city gas, and water prices declined 5.2%, impacted by lower prices for liquefied natural gas (LNG) and coal.
Yen Depreciation Contributes to Higher Import Prices
The cost of imported goods—measured in yen—rose 2.7% in 2024, as the yen depreciated significantly. The U.S. dollar briefly exceeded ¥161 last summer, making imported goods more expensive for Japanese businesses.
A BOJ official commented: “The yen’s weakening and moves to raise prices to reflect higher material and labor costs continued throughout the year. We will keep watching corporate pricing behavior and international commodity market trends.”
December PPI Data: Continued Price Increases
In December 2024, the PPI rose 3.8% year-over-year, reaching 124.8, marking the 46th consecutive month of increases. Out of 515 surveyed items:
- 389 saw price increases.
- 103 recorded declines.
Notable price increases in December:
- Electricity, city gas, and water rose 12.9%, reflecting the end of a government subsidy program.
- Agricultural, forestry, and fishery products surged 31.8%, mainly due to higher rice prices.
Economic Outlook: Inflationary Pressures Persist
With producer prices continuing to rise, Japan’s corporate pricing behavior and commodity market trends will be closely monitored. Businesses are struggling to absorb rising costs, leading to continued price hikes across multiple sectors.
As global commodity prices fluctuate and the yen remains weak, further inflationary pressures may persist in 2025, raising concerns for policymakers and businesses alike.
