Japan’s Producer Price Index (PPI), officially known as the Corporate Goods Price Index (CGPI), measures changes over time in the prices that domestic producers receive for the goods they sell. The index is compiled and published by the Bank of Japan, and is designed to capture price movements earlier in the supply chain than consumer-facing inflation gauges.
Unlike the Consumer Price Index (CPI), which tracks the prices households pay for a basket of goods and services, the CGPI focuses solely on prices charged by companies. As such, it provides insight into cost pressures facing producers rather than consumers. Movements in the index can therefore act as an early signal of inflationary forces building within the economy, particularly if firms attempt to pass rising costs on to end users.
The CGPI is constructed using a broad basket of domestically produced goods that reflects the structure of Japan’s industrial economy. This includes raw materials such as metals and chemicals, semi-finished goods, and a range of finished products. Each category is assigned a weight based on its relative importance to overall economic activity, allowing the index to capture shifts across different stages of production.
However, the CGPI has several limitations worth noting. It does not adjust for quality improvements over time, which means price increases may sometimes overstate underlying inflation. In addition, the index only covers domestically produced goods and excludes imported items, limiting its usefulness in assessing external price shocks such as exchange-rate moves or global commodity swings.
From a market perspective, the CGPI is closely watched for its implications for both consumer inflation and currency dynamics. A firmer-than-expected reading could support the view that pipeline inflation remains alive, potentially lending the yen short-term support
