Its a low key day for the data agenda. The PPI data from Japan is of interest.
Japan’s October producer price index (the corporate goods price index) is due at 23:50 GMT (18:50 US Eastern). Consensus looks for prices to rise 0.3% on the month, reversing September’s 0.3% drop. The annual rate is expected at 6.5%, down from 6.8%.
September’s figure missed forecasts. The annual rate slowed to 6.8% from 7.6% in August, mainly because of a 13.3% annual fall in agricultural prices as newly harvested rice got cheaper. An annual pace near 7% is still far above anything consistent with the BoJ’s price goal, though, so a softer October print would not mean pipeline pressure has gone away.
Three things to watch:
- Import prices. The yen-based import price index rose 24.5% year on year in September, or about 25%, with the weak yen still pushing up raw material costs. (Japan wholesale inflation misses at 6.8% but stays high enough to keep BOJ hike alive )
- Energy pass-through. Elevated oil prices linked to the Iran war magnify the effect of a weak yen on a country that imports most of its energy.
- Monthly momentum. If the month-on-month figure turns positive again, it would suggest the September dip was a blip and not the start of a turn lower.
BoJ implications
The BoJ held at 1.25% in an 8-1 vote on October 30, with Takata dissenting in favour of a hike to 1.5%. The board also raised its FY2027 inflation forecast to 2.6% from 2.4%. In a Bloomberg survey, 83% of economists expect the next hike in December, up from 35% a month earlier. The next policy meeting is on 17-18 December.
A print close to consensus is unlikely to change the December picture. A clear upside surprise would strengthen the hike case and could give the yen some support. A downside miss is unlikely to derail a hike, since the BoJ puts more weight on underlying consumer inflation and wages than on upstream goods prices.
This article was written by Eamonn Sheridan at investinglive.com.