Oil and chemicals end a two-month dip in Japan's producer prices

Japan's producer prices rose 0.7% in October from September, ending two months of small declines, the Bank of Japan said at 8:50 a.m. JST on Thursday, November 12 (23:50 UTC on Wednesday) in its preliminary corporate goods price index report. From a year earlier the index was up 7.1%, against 6.8% in September.

The index had fallen 0.3% in August and a revised 0.2% in September, which had pulled the annual rate down from 7.7% in July. October's increase recovered part of that ground: the annual rate rose 0.3 percentage point (computed) but stayed 0.6 point below the July reading (computed). The index stood at 136.8, with 2020 set at 100. Excluding the extra charges for summer electricity that the bank adjusts for between July and September, prices rose 0.9% on the month.

Fuel, petrochemicals and steel did the lifting

The bank's breakdown names the groups that moved the index. Petroleum and coal products contributed 0.20 point to the 0.7% rise, led by heavy oil, naphtha and jet fuel, and their prices rose 2.9% on the month after a 2.2% fall in September. Chemicals contributed 0.15 point, with xylene, ethylene and propylene at the top of the list, and electric power, gas and water another 0.15 point. Iron and steel added 0.11 point.

The annual figures show how far those costs have moved from a year earlier: petroleum and coal products were up 15.9%, chemicals 15.5%, plastic products 14.1% and electric power, gas and water 15.8%.

One group pulled the other way. Agriculture, forestry and fishery products fell 6.6% in October and took 0.28 point off the monthly change, with brown rice, polished rice and pork named as the main items. That group was 25.0% cheaper than a year earlier.

A weaker yen made the import bill bigger

The pressure came in through imports. The import price index rose 2.3% in contract currencies, and petroleum, coal and natural gas accounted for 1.62 points of that, with crude petroleum, jet fuel and gasoline named. Electric and electronic products, led by MOS memory chips, added 0.48 point.

Measured in yen, import prices rose 3.3% on the month and were 24.8% above October 2025, compared with 19.2% in contract currencies. The gap between the two measures is the exchange rate: the bank's dollar-yen column shows a 1.0% change for October, and its notes say a negative change indicates an appreciation of the yen, so October's figure reflects a weaker yen. Japan's finance ministry had bought yen in the market earlier in the year, including its largest one-day purchase on record on July 30.

Export prices rose 0.6% in contract currencies.

A central bank that already expected this

The Bank of Japan kept its policy rate at around 1.25% on October 30 in an 8-1 vote. In its October outlook, the bank expected consumer prices excluding fresh food to accelerate to a level clearly above 2 percent in the first half of its projection period, naming a rise in crude oil prices, higher prices of semiconductors and other items, and the depreciation of the yen. The October producer data show the same three items among the biggest contributors. The bank's next policy meeting is on December 17-18, according to its meeting schedule.

We would watch the plastics and steel lines more than the oil line

Our reading is that October's rise is mostly the energy and currency shock the Bank of Japan described in its outlook, which it can answer only imperfectly with interest rates. The part we would weigh most is the spread into processed goods: plastic products up 14.1% and iron and steel adding 0.11 point suggest costs moving down the supply chain. If those lines keep climbing while oil steadies, we expect the case for a higher rate at the December 17-18 meeting to strengthen. Falling rice prices are the offset, and a firmer yen would cut the import bill quickly; either would argue for waiting. One month does not make a trend, and the preliminary figures are revised.

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