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Japan's PPI Climbs to 128.4, Hitting a New High, Up Nearly 2.9% YoY, Extending Inflationary Pressure

By AI Insights

2026-02-12

Trend analysis based on the updated indicator. View the Indicator→

According to the latest data, Japan's Producer Price Index (PPI) for December 2025 reached 128.4, rising approximately 0.23% from the previous month's 128.1, and growing about 2.9% compared to the same period last year (124.8), continuing to set a record high. This upward trend indicates that despite the easing of global supply chain bottlenecks, domestic Japanese enterprises still face ongoing compounding cost pressures. The index has maintained a high level above 128 for several consecutive months, shattering optimistic market expectations that inflation would recede rapidly.

A closer look at the detailed performance reveals that while recent energy and fuel prices have seen double-digit corrections (such as petroleum and coal products), providing some offsetting effect on the index, the core drivers came from the significant surge in prices for "non-ferrous metals" and "agricultural products." Market intelligence suggests that non-ferrous metals prices rose sharply due to recovering global demand and supply constraints; meanwhile, the food and beverage category became another major pillar pushing up the overall PPI as labor costs and raw material price increases were passed on.

Regarding this data, the Bank of Japan (BOJ) and analytical institutions point out that although the yen's long-term weakness has seen a slight respite recently, accumulated import costs from the past continue to be reflected on the production side. Institutional views suggest that the willingness of companies to pass on wage hikes and raw material costs to downstream sectors remains strong. This is gradually transforming "cost-push inflation" into a sticky structural characteristic, increasing the urgency for the central bank to adjust its loose monetary policy.

Looking at the short term (1-2 months), as the base effect of energy continues to play out, the PPI YoY increase may see a slight convergence, but whether the MoM rate turns negative will depend on the yen exchange rate and fluctuations in commodities. In the medium term (3-6 months), the key risk lies in whether wage hikes following the Spring Offensive (Shunto) will further push up service-sector PPI. If the data remains persistently high, it will become a key catalyst for the BOJ to further raise interest rates in early 2026. Investors need to be mindful of the potential impact of JGB yield fluctuations on the market.

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