New information on the corporate price index for February 2024 was announced on the morning of March 12, 2024 at 8:50 AM. There is speculation about how the PPI is affecting the interest rate policy and whether Japan will reconsider its negative interest rate policy.
What is PPI
The PPI (Producer Price Index) is an indicator that looks at how the prices change when factories ship goods. It helps to understand the fluctuation of raw material and wholesale prices, and is used as a sign of whether prices may rise or fall in the future. When the PPI rises, it is thought that future consumer prices may also rise, so the central bank uses this to decide on monetary policy.
(1) Inflation expectations and long-term interest rates
Long-term interest rates refer to the yield of long-term government bonds issued by the government. These are influenced by inflation expectations, economic growth, and the central bank's interest rate policy.
When PPI rises and inflation is expected, demand for yield on everyone's bonds may increase, and long-term interest rates might also rise.
(2) PPI index and deposit interest rates
Deposit interest rates are determined by the central bank's policy interest rates and market conditions...