Japan’s Producer Inflation Slows to 6.8 Percent as Farm Prices Fall 8.8 Percent in a Month

By The Edge Research Team

Japan’s producer price index rose 6.8 percent in September from a year earlier, slowing from 7.6 percent in August, according to preliminary figures the Bank of Japan released on 13 October. The index fell 0.3 percent from August, its second straight monthly decline, to 135.7 against a 2020 average of 100. Prices of agriculture, forestry and fishery products dropped 8.8 percent in the month and on their own subtracted 0.42 percentage points, more than the whole decline.

Farm goods drag the index lower

The release names brown rice, polished rice and pork as the commodities behind the farm group’s fall. That group carries a weight of 40.3 in 1,000, or 4.03 percent of the index, yet its contribution of minus 0.42 points was 1.4 times the size of the headline move, on our calculation. Its yearly rate swung from a rise of 1.5 percent in August to a fall of 13.3 percent in September, a turn of 14.8 points in one month.

Petroleum and coal products were the second drag. They fell 2.2 percent on the month and took 0.15 points off the index, with heavy oil, gas oil and jet fuel named as the movers. Their yearly rate eased to 11.5 percent from 14.7 percent.

Of the groups listed, 7 pushed the other way. Electric power, gas and water rose 1.3 percent and added 0.08 points; plastic products rose 1.1 percent and metal products 0.7 percent. The 7 positive contributions printed in the release add up to 0.25 points. Set against the two drags, which total 0.57 points, they leave minus 0.32, consistent with the rounded minus 0.3 percent headline, on our calculation.

Outside farm goods, every group in the index was higher than a year earlier, 22 of the 23, on our calculation. Chemicals rose 13.3 percent year on year and plastic products 12.8 percent, both faster than in August. Nonferrous metals were 40.2 percent higher than a year earlier, and at 261.1 that group’s index stands at 2.6 times its 2020 average. Information and communications equipment rose 15.3 percent on the year.

What moved the producer price index in September

Contribution is the percentage points each group added to or took from the minus 0.3 percent monthly change in the all commodities index. Preliminary figures for September 2026.

From 2.2 percent in February to 7.7 percent in July

The yearly rate climbed 5.5 points between February and July, and April alone supplied 2.5 of them, on our calculation. September’s reading takes it back to May’s pace. The step down of 0.8 points from August is the largest fall in the yearly rate from one month to the next in the release’s table, which runs from August 2025, on our calculation.

The base did part of the work. The index fell 0.3 percent this September, while in September 2025 it rose 0.5 percent, so the comparison level rose as the current level slipped. Dividing 135.7 by the 127.1 of a year earlier gives 6.77 percent, which rounds to the published 6.8 percent, on our calculation.

The level itself remains well up on the year. September’s 135.7 is 5.85 percent above December 2025’s 128.2, 7.02 percent above the 2025 calendar year average of 126.8 and 0.59 percent below July’s 136.5, the highest monthly level in the release’s table, on our calculation. Of the 14 monthly changes tabulated, only 3 are declines: August 2025 and the last two months.

The third quarter as a whole averaged 136.1, up 0.9 percent on the second quarter and 7.3 percent on a year earlier, against 6.6 percent in the second quarter. The chain-weighted version of the index rose 6.2 percent on the year, 0.6 points below the fixed-weight index’s 6.8 percent, and fell 0.1 percent on the month.

Producer price index, monthly path

Index, calendar year 2020 = 100. October to December 2025 are not shown; December 2025 stood at 128.2. September 2026 is preliminary; June and August 2026 include revisions. The 2025 calendar year average is 126.8.

The yen effect on import prices

Import prices measured in the currencies of the contracts rose 1.0 percent in September. Petroleum, coal and natural gas supplied 0.69 points of that rise, through liquefied natural gas, naphtha and jet fuel. In yen, the same basket fell 0.2 percent. The difference came from the currency: the exchange rate column in the release shows a change of minus 1.5 percent in September after minus 2.4 percent in August, and a negative figure there marks a stronger yen. Over the two months combined that is a 3.9 percent move in the yen’s favour, on our calculation.

Year on year the currency works the other way. Yen-basis import prices rose 24.5 percent while contract-currency prices rose 17.9 percent. Dividing the two index levels, the yen series stood at 1.35 times the contract series in September against 1.28 times a year earlier, meaning currency moves added 5.6 percent to the yen cost of imports over the year, on our calculation.

The two bases are now heading in different directions. Contract-currency import prices are back at 143.6, their July level, after a 1.0 percent dip in August, and their yearly rate quickened to 17.9 percent from 16.8 percent. In yen, the yearly rate eased to 24.5 percent from 25.1 percent, and the index sits 3.05 percent below July’s 199.9, the highest monthly level the release prints, on our calculation. Energy stands out: the yen import index for petroleum, coal and natural gas reached 300.5, 3.0 times its 2020 average, and was 43.6 percent above a year earlier.

Import price index, yen against contract currency

Index, calendar year 2020 = 100; September is preliminary. The change since December 2025 is our calculation from the published index levels of 163.9 and 123.0.

Exports lifted by electronics

Export prices rose 1.4 percent in contract currencies and 0.5 percent in yen in September. Electric and electronic products, led by memory chips, process control instruments, video equipment and digital cameras, supplied 0.80 points, or 57 percent of the contract-currency rise, on our calculation. In yen, that group’s prices were 40.9 percent higher than a year earlier, the fastest of the 7 export groups.

Against import prices, export prices have lost ground. The ratio of yen export prices to yen import prices fell to 0.84 from 0.89 a year earlier, a 5.3 percent deterioration, on our calculation; on contract currencies the same ratio fell 4.7 percent.

Main contributors to export and import price changes in September

Contributions in percentage points to the monthly change on the contract currency basis; the total row is the monthly change in percent. “Not listed” means the group was not among the contributors printed for that index.

Why it matters: The central bank compiles the corporate goods index as a key gauge of overall price developments in Japan. On 18 September the Bank changed its guideline to encourage the uncollateralized overnight call rate to remain at around 1.25 percent, by a 7 to 2 vote, effective 24 September; its 31 July statement carried a level of around 1.0 percent. September’s figures are mixed. Domestic producer inflation slowed on farm goods and fuel, but contract-currency import prices are still climbing, and in yen terms September’s rise was more than offset by the stronger currency.

Outlook: The next Monetary Policy Meeting is on 29 and 30 October, and the full text of the October Outlook for Economic Activity and Prices is scheduled for 2 November. October producer prices are due on Thursday, 12 November. Whether the farm price fall extends, and whether the yen holds its recent gains while contract-currency import prices rise, will decide if September was a turn or a pause.

Sources: Bank of Japan, The Edge.

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