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JAPAN DATA: Services PPI Above Forecasts, Supports Inflation Outlook

JAPAN DATA
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The Japan services PPI print was stronger than forecast for Oct. It rose 2.9% y/y, against a 2.5% forecast and a revised 2.8% gain in Sep (the original print was +2.6%y/y). In m/m terms we rose 0.8%. 

  • At face value, this points to a supportive backdrop for headline CPI in Japan. The chart below overlays the services PPI y/y (which is the white line) against headline CPI y/y. Recently we have seen a modest divergence between the two series, but the historical direction correlation is firm.
  • Services/domestic related inflation has been a key focus point for the BoJ as it looks for a durable inflation backdrop around its 2% inflation target. Today's data helps this case at the margin. Last week BoJ Governor Ueda stated the outcome of the Dec meeting couldn't be predicted, which suggests it will be a live meeting. 

Fig 1: Japan Services PPI & Headline CPI Y/Y 

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The Japan services PPI print was stronger than forecast for Oct. It rose 2.9% y/y, against a 2.5% forecast and a revised 2.8% gain in Sep (the original print was +2.6%y/y). In m/m terms we rose 0.8%. 

  • At face value, this points to a supportive backdrop for headline CPI in Japan. The chart below overlays the services PPI y/y (which is the white line) against headline CPI y/y. Recently we have seen a modest divergence between the two series, but the historical direction correlation is firm.
  • Services/domestic related inflation has been a key focus point for the BoJ as it looks for a durable inflation backdrop around its 2% inflation target. Today's data helps this case at the margin. Last week BoJ Governor Ueda stated the outcome of the Dec meeting couldn't be predicted, which suggests it will be a live meeting. 

Fig 1: Japan Services PPI & Headline CPI Y/Y 

Keep reading...Show less