Japan Core CPI:

 https://mainichi.jp/english/articles/20210720/p2g/00m/0bu/018000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices rose 0.2 percent in June from a year earlier as higher energy prices more than offset the impact of falling mobile phone fees, government data showed Tuesday.

Nationwide core consumer prices, excluding volatile fresh food items, gained for the second straight month following a 0.1 percent rise in May, according to the Ministry of Internal Affairs and Communications.

The core CPI, a gauge of inflation, is still far from the Bank of Japan's 2 percent inflation target, but prices gaining, albeit only slightly, will be a relief to policymakers.

Ideas:

Its interesting to keep track of prices and core consumer prices, but it looks like Japan is not experiencing any kind of real inflation at the moment. An increase of 0.2 percent is really not a major problem for consumers.

However, it might be challenge for the Bank of Japan, as it goal has been the past seven years to reach a 2.0 percent inflation rate. The 2.0 inflation rate is not just some arbitrary number it represents a sold level of demand and economic activity in an economy.

And as can be seen, prices related to many different areas or prices can be going up and down at the same time. While the global energy markets and oil supplied to Japan might be rising the government plan to lower mobile phone rates seems to be working. 

So prices in a market economy are never linear meaning all going up or all going down at the same time. Even with an increase in overall consumer demand prices are never all up or all down.

Article:

Major gainers were in the energy segment, with kerosene prices surging 21.4 percent and gasoline jumping 17.9 percent. Overall petroleum products gained 14.8 percent.

Mobile communication fees plunged 27.9 percent from a year earlier, as major operators began to offer cheaper plans for data usage in the face of mounting government pressure.

"The increase in energy prices reflecting higher crude oil prices is a major factor (behind the rise in the core CPI)," a ministry official said.

Ideas:

An increase in he energy markets can be both a positive and a negative. For the energy suppliers it might be a positive and now they can sell their supplies at a higher prices to those who need the commodities. And the thing with commodities and are not very elastic, at least to a point, meaning energy products are needed by whomever on a daily basis and even with higher prices consumers of those products will keep buying them.

But of course with families or home consumers, if the prices does get too high and or if its in the middle of a hot summer, they might cut back some on their use of their AC.

And the the operators and mobile communication fees, is it a case that maybe they could have lowered their fees at anytime have only decide to do it as maybe the Japanese government put pressure on them.

Or for example whomever the market leader was, such as Docomo always kept their prices a little high so the followers in the market did the same thing.

But now that they are lowering their prices, lets say their profit margins are now less, so they increase the prices in some other products or services to maintain their profit margins.

Article:

"It's hard to say how prices will move but we will have to closely monitor the crude oil supply situation and how it will affect prices," the official said.

The Organization of the Petroleum Exporting Countries and nonmember countries have agreed to phase out production cuts as crude oil prices have been surging.

Japan's inflation situation is in stark contrast with the United States and some European nations, where inflationary pressures are increasing in line with the reopening of their economies following COVID-19 vaccinations.

Ideas:

Usually in normal supply and demand an increase in supply or a surplus can put pressure on prices in the market as suppliers have too much supply compared to the amount of demand for that market.

But that is not always the case, as the global market may not act in the normal supply and demand scenario. As suppliers in countries might just order what they need and nothing more and or they might operate on auction system as they will barter for the best prices or even quantity they can get.

And again if oil prices were surging, in normal supply demand, above, the level of production might have been reduced, which means a possible shortage, which put pressure on suppliers to raise their prices.

Japan's economy, for whatever reason, doesn't seem to always follow the same path as the US and the EU such as inflation increasing in those countries but not in Japan.

Of course Japan has been a little behind in the vaccination situation so most likely consumer demand in Japan is not at its maximum yet, if it ever is.

Japan's inflation level, which is related to consumer demand, business demand, and increasing supplier prices hasn't reached the 1.0 percent level in many years. There could be many reasons for this as the Bank of Japan continues to tries different strategies to increase demand.

One of Abe's ideas when his idea to stimulate the economy, when he was Prime Minister was to get companies to increase the salaries of their employees so that employees would better about their salaries and then begin to spend more of it in the economy, which in turn increases overall consumer demand in the Japanese economy which in turn then might increase the overall inflation rate in the economy.

And the Bank of Japan as a further way to help the economy and to force companies to use their large deposits just sitting in banks further reduced the rates related to banks and companies as an incentive to "use your money or lose your money" over time, meaning increase the salaries of your employees.

So the negative interest rate focused on trying to get companies to use their deposits in banks and at the same allowed those who needed it to get some "easy money" and use it the economy to stimulate economic growth.

Article:

For the current business year through next March, the BOJ expects the core CPI to rise 0.6 percent from a year earlier.

"We can't find domestic factors driving the CPI higher, it's all external ones," said Toru Suehiro, a senior economist at Daiwa Securities Co.

So-called core-core consumer prices, excluding fresh food and energy items, decreased 0.2 percent in June from a year earlier for the third straight month of fall, the ministry data showed.

Ideas:

Even an increase of 0.6 is better than nothing, but until the pandemic ends CPI might not increase any more than that. Unless the economy can really open up, the demand is not going to be there.

And companies, whose supplier prices which might be rising are not going to "pass on" the increase of their costs just yet, which helps inflation, because overall demand in the economy is no where it should be yet.

So what are the external factors? Most likely the global energy or oil market as prices begin to increase and also maybe import prices increasing from global markets overseas.

Another area might be the purchasing of foreign cars might the upper middle upper groups in Japan who might be using their money to buy expensive foreign cars because they can't use it taking trips overseas at this time.

At this time, for many consumers, still, they are only buying the essential items and not buying anything more. 

But that doesn't mean everyone in the Japanese economy is only buying the daily basics. If that were to happen the economy would be in real trouble. 

Article:

Governor Haruhiko Kuroda said last week that the bank will closely monitor the impact of rising raw material costs, which vary among sectors.

"Exporters can absorb rising costs but firms relying on domestic demand, which are still struggling amid the pandemic, may not be able to," Suehiro said. "Coupled with the impact of the weak yen, the impact on the economy as a whole will be negative."

Ideas:

Yes rising supply costs might be a major challenge for many companies in Japan. Because overall demand is not where it should be yet, companies are unable to pass their supply costs on and as such their profit margins are not where they want them to be.

Normally a weak yen favors the exporters as they an get more for their exports in countries overseas.

A strong yen favors the importers and they can buy overseas products at a lower price.

So if Japanese companies needs raw materials from overseas and if the yen is weak compared to the country that they need to imports from, that increases their supply costs. and unfortunately they are unable to pass those costs onto whomever is next in the supply chain.

Have a day and be safe!