Japan's May CGPI continued to rise month on month, but slowed sharply from April

Overview

This report tracks changes in Japan's May corporate goods prices and import/export prices. Goldman Sachs believes that after a sharp jump in April driven by price revisions, the domestic corporate goods price index continued to rise month on month in May, but at a significantly slower pace; on a year-on-year basis, growth accelerated further as the impact of the April price revisions persisted. Import prices continued to be driven by petroleum-related products, but their month-on-month growth also fell back sharply from April.

Core views

The core view is that price pressure at the corporate level in Japan has not yet faded, but the exceptionally strong price-revision shock seen in April eased in May. Domestic CGPI, yen-denominated import prices, and export prices all continued to rise, indicating persistent inflation pressure in costs and trade prices; however, month-on-month increases in most major categories slowed from April, suggesting marginal cooling in short-term price momentum.

Analysis framework

The report uses month-on-month, year-on-year, and component-contribution analysis of Japan's corporate goods price index and yen-denominated import/export prices, focusing on the comparison between May and April price changes and breaking down the impact of categories such as petroleum and coal, chemicals, electricity/gas/water, machinery, food and beverages, and electronic equipment on the overall price index.

Methodology notes

• Macro price indicatorsCorporate goods price index analysis

  Comparison of CGPI month-on-month and year-on-year changes

  By comparing the month-on-month and year-on-year growth rates of domestic CGPI, the analysis identifies changes in short-term price momentum and annual inflation pressure.

• Price component breakdownCategory contribution analysis

  Increases and contribution by major categories

  The change in the overall index is broken down into components such as petroleum and coal products, chemical products, and electricity/gas/water to determine the sources of price pressure.

• Trade price analysisYen-denominated import and export prices

  Import and export price momentum

  Yen-denominated import and export prices are used to observe external costs, exchange-rate-related price transmission, and trade-goods price pressure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Japanese macro assets

  Corporate goods prices and import costs are important inputs for inflation and policy expectations

  Strengths

  Year-on-year price pressure remains strong, indicating a relatively elevated nominal growth and corporate pricing environment.

  Weaknesses

  Month-on-month momentum slowed notably from April, suggesting the short-term price shock may be weakening.

  Comparison

  Most indicators in May fell back from April's unusually high growth rates, but year-on-year growth continued to rise.

  Risks

  If energy prices or yen depreciation pressures strengthen again, import costs may once more push up corporate goods prices.

• Energy and petroleum-related products

  Petroleum and coal products, as well as import prices for petroleum, coal, and natural gas, were key contributors to this period's price increases

  Strengths

  Related prices remained in positive growth territory, supporting the overall price index.

  Weaknesses

  Month-on-month gains in May slowed sharply from April, indicating that the earlier shock has partly faded.

  Comparison

  Domestic prices for petroleum and coal products rose +3.0% month on month in May, below April's +11.8%; related import prices rose +8.0% in May, below April's +27.3%.

  Risks

  The Middle East situation and energy price volatility may cause prices to rise again later.

Key data

• Domestic CGPI MoMMay +0.9%; April +2.8%It still rose in May, but slowed significantly from April.
• Domestic CGPI YoYMay +6.3%; April +5.3%The year-on-year growth rate was the largest since March 2023.
• Yen-denominated import prices MoMMay +2.7%; April +8.7%Import prices continued to rise, but the increase narrowed sharply from April.
• Yen-denominated import prices YoYMay +25.5%; April +21.0%The year-on-year growth rate accelerated further.
• Yen-denominated export prices MoMMay +0.4%; April +4.1%Export prices edged up.
• Yen-denominated export prices YoYMay +20.6%; April +19.1%Export prices maintained double-digit year-on-year growth.
• Petroleum and coal product pricesMay MoM +3.0%; YoY +13.8%Contributed 0.21 percentage points to overall domestic CGPI, below April's 0.75 percentage point contribution.
• Import prices of petroleum, coal, and natural gasMay MoM +8.0%; April +27.3%They still pushed up import prices, but the increase slowed notably from April.

Impact & implications

The report implies that cost pressure on Japanese companies remains elevated, especially as petroleum-related, chemical, and utility-related prices continue to push up the index; however, the concentrated price-hike effect brought by April's price revisions temporarily eased in May, with short-term inflation momentum cooling at the margin. For investors, the focus should be on whether energy prices, yen-denominated import costs, and corporate price pass-through continue to affect Japan's inflation and monetary policy expectations.

Risks

• Energy price volatility may again push up Japan's import costs and corporate goods prices.
• Changes in the yen exchange rate may amplify or ease import price pressures.
• The lagged impact of April's price revisions may continue to be reflected in year-on-year readings.
• If companies continue passing costs downstream, consumer inflation pressure may prove more persistent.

What to watch

• Potential naphtha price revisions that may typically occur in July.
• Subsequent month-on-month changes in prices for petroleum and coal products, chemical products, and electricity/gas/water.
• Whether yen-denominated import prices continue to slow.
• Whether Japan's CGPI year-on-year growth rate moves further higher at elevated levels or peaks.
• The impact of the Middle East situation on energy prices and Japan's import costs.