Japan’s producer prices accelerated sharply in May, with PPI rising from 5.3% yoy to 6.3% yoy, well above expectations of 5.5% yoy and marking the fastest annual increase since March 2023. On a monthly basis, wholesale prices rose 0.9%, following a revised 2.8% gain in April. The data highlight how the Middle East energy shock is increasingly feeding into upstream inflation pressures across the Japanese economy.
The latest increase was driven primarily by higher prices for nonferrous metals, chemicals and petroleum products as the effective closure of the Strait of Hormuz pushed up crude oil and naphtha costs. The surge in import prices was even more striking. Japan’s yen-based import price index jumped 25.5% yoy in May, accelerating from 21.0% yoy in April and recording its strongest increase since November 2022.
At the same time, strong overseas demand for AI-related semiconductors continued to provide an important offset. Export prices climbed 20.6% yoy in May, supported by robust shipments of technology products. While the surge in export earnings helps cushion the deterioration in Japan’s terms of trade, the broader picture remains one of mounting inflation pressure.
| Indicator | April | May | Forecast |
|---|---|---|---|
| PPI Y/Y | 5.3% | 6.3% | 5.5% |
| PPI M/M | 2.8%* | 0.9% | N/A |
