October corporate goods prices rose 7.1% year on year and 0.7% month on month, exceeding market expectations. Procurement costs were pushed higher by rising crude oil and energy prices and the weaker yen, while expanding AI demand also encouraged prices to follow higher.
According to the October corporate goods price index, preliminary figures released by the Bank of Japan, the domestic corporate goods price index rose 7.1% year on year to 136.8, up 0.7% month on month and returning to positive growth for the first time in 3 months. Both figures exceeded market expectations.
The increase reflected higher energy prices, particularly a 15.9% year-on-year rise in prices for petroleum and coal products, as well as higher chemical product prices and increased import costs due to the weaker yen. Higher prices for semiconductor-related products resulting from expanding AI demand also had an impact.
As companies pass higher costs through to prices, the effects could spread to consumer prices and wage trends. Attention will focus on the BOJ's monetary policy decisions and developments in wages and private consumption. The impact of the weaker yen, higher energy prices and import costs on the broader economy is also attracting attention.
The October increase could affect the foreign-exchange and Japanese equity markets. The yen is being driven by the US-Japan interest-rate differential and expectations for additional BOJ rate hikes, while movements in semiconductor and energy-related stocks will also require attention. Looking ahead to the December meeting, trends in prices and wages will be important factors in investment decisions.