JAPAN DATA: Import Price Pressures May Build Given Oil Spike, Weaker Yen

The spike in oil prices, if sustained, is likely to feed through into higher Japan imports in coming months. The first chart below overlays Brent crude y/y changes (which are extended to end March based off current spot prices), against petroleum, coal import prices y/y, along with aggregate import prices y/y. We can observe the sharp rises seen in 2022, following the Russian invasion of Ukraine and spill over to higher energy prices then. * At this stage, there is also no offset from the yen, with USD/JPY remaining elevated and rising in y/y terms. Without a sharp turn around in yen, y/y changes in USD/JPY are likely to remain positive in the first half of the year. The second chart below plots USD/JPY y/y changes against import prices y/y. * This could in turn feed into stronger CPI pressures and impact the market outlook from a BoJ standpoint. For next week's meeting little is priced in terms of tightening risks, with a full hike not priced until the July meeting. * The caveat is the government response to higher oil prices, while our policy team noted recently: The Bank of Japan is weighing upside risks to prices from higher crude oil costs against downside risks to growth from a deterioration in the terms of trade, a dynamic likely to reinforce caution and keep the 0.75% policy rate unchanged at the March meeting, while potentially delaying further normalisation, MNI understands. Fig 1: Brent Crude Spike To Drive Higher Import Costs Source: Bloomberg Finance L.P./MNI Fig 2: USD/JPY Y/Y and Japan Import Prices Y/Y Source: Bloomberg Finance L.P./MNI

JAPAN DATA: Feb PPI Below Forecasts, But Import Y/Y Pace Strongest Since 2024

Japan's Feb PPI was weaker than forecast, falling 0.1%m/m (versus 0.2% forecast and 0.2% prior). In y/y terms we eased to 2.0%, against a 2.2% forecast and prior 2.3% outcome. The chart below plots the PPI y/y (white line), versus CPI headline y/y. The two series have broadly been tracking lower since the early parts of 2025, a non-threatening backdrop, although stickier underlying inflation pressures have been evident. The Feb print may be discounted to some extent in any case, given the surge in energy prices since the end of Feb due to the Iran conflict. * In terms of the detail PPI for manufacturing eased to +0.3%m/m (+0.5% was recorded in Jan). Petroleum, coal rose 3.1%m/m, ending a run of monthly declines back to Oct last year. This will be a focus point for the March print and potentially longer. * Import prices rose 0.1%m/m, from +2.0% in Jan. In y/y terms, import prices rose 2.8%, the strongest pace since July 2024. Fig 1: Japan Headline PPI and CPI - Y/Y Source: Bloomberg Finance L.P./MNI

MNI: JAPAN FEB CORP GOODS PRICE INDEX +2.0% Y/Y; JAN DEC +2.3%

* MNI: JAPAN FEB CORP GOODS PRICE INDEX +2.0% Y/Y; JAN DEC +2.3% * JAPAN FEB CORP GOODS PRICE INDEX -0.1% M/M; JAN +0.2%

MNI: USDA: 2025/2026 CORN PRODUCTION EST 17.02B BSL

* MNI: USDA: 2025/2026 CORN PRODUCTION EST 17.02B BSL * USDA: 2025/2026 CORN YIELD EST 186.50 BSL/ACRE * USDA: 2025/2026 SOYBEAN PRODUCTION EST 4.26B BSL * USDA: 2025/2026 SOYBEAN YIELD EST 53.00 BSL/ACRE * USDA: 2025/2026 WHEAT PRODUCTION EST 1.98B BSL * USDA: 2025/2026 WHEAT YIELD EST 53.30 BSL/ACRE