Reuters: Japan Wholesale Prices:

https://www.yahoo.com/finance/news/japans-wholesale-prices-mark-first-020108996.html

Article:

TOKYO (Reuters) - Japan's wholesale prices marked the first annual decline in five months in March, suggesting that slumping global demand for oil and raw material due to the coronavirus pandemic will weigh on inflation in coming months.

The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, fell 0.4% in March from a year earlier, Bank of Japan (BOJ) data showed on Friday.

Ideas:

March of 2020 was probably the where most businesses saw a decrease in demand and especially a decrease in global demand.

And most likely the first signs of the global supply challenges that effected much of business globally.

For example, if you tried to order something on Amazon in the US to another country the wait was twice and three times longer than normal.

And then you add in the need for raw materials and other supply sources needed by companies the global logistics challenges were quite large starting most likely in March.

Article:

The drop was bigger than a median market forecast for a 0.1% decline and followed a 0.8% rise in February. It was the first year-on-year fall since last October, when prices fell 0.3%.

Prices of oil and coal prices fell 10.3% in March from a year earlier, while those of non-ferrous metal goods were down 7.6%, the data showed.

Wholesale prices, considered a leading indicator for consumer inflation, have been under pressure from slumping oil and metal costs as the pandemic paralyses global economic activity.

Ideas:

Global oil supplies are always under some kind of pressure because of its volatility meaning prices are always changing and sometimes change very fast.

As a result those who need the oil, such as businesses, and those who are suppliers, but not the producers are always under constant pressure as to what the global oil market is going to do.

And as both business and consumer demand begins to decrease because of the pandemic, those in the supply chain might be reluctant to increase prices if their supply and resource prices increases due to decreasing demand in the markets they are in.

Article:

The data heightens the chance the BOJ will cut its consumer inflation forecasts when it conducts a quarterly review of its projections at its April 27-28 policy meeting.

Under its current forecasts made in January, the BOJ expects core consumer inflation to hit 1.0% in the fiscal year that began in April, remaining distant from its 2% target.

Sources have told Reuters the BOJ is likely to make a rare projection this month that the world's third-largest economy will shrink this year as the pandemic threatens to push the country deep into recession.  

Ideas:

The Bank of Japan has been trying to get inflation to the 2 percent level since about 2014 with no success.

Yes if inflation does get to the 2 percent level, that is a good indication that there might be a good level of economic activity in the economy, especially consumer spending which makes up about 50 percent of Japan's GDP.

But that is not the only idea. There is the idea of supplier costs or company costs and passing on the costs to the next in line. Companies seem to be somewhat reluctant to pass on the increase in their supply costs and they are always hesitant because of what consumers might think.

So what do they do maybe to make sure they keep the same profit margin despite an increase in supply costs? They might not give any salary increases to their workers.

But the problem with that is their workers are consumers and if consumers don't feel good about their salary and or don't see any extra or disposable income, then they are not going to spend in the economy.

So the Bank of Japan sees these multiple challenges but has not been able to solve the puzzle related to getting inflation to the 2 percent level as of yet.

Have a nice day and be safe!