Japan's Core Consumer Prices:

 https://mainichi.jp/english/articles/20210820/p2g/00m/0bu/029000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices dipped 0.2 percent from a year ago in July, as lower mobile data fees remained a big drag despite support from rising energy prices, government data showed Friday.

Nationwide core consumer prices, excluding volatile fresh food items, marked the 12th straight month of decline, according to the Ministry of Internal Affairs and Communications, posing a challenge for the Bank of Japan in its quest to hit its 2 percent inflation target.

The ministry changed the base year to 2020 from 2015 and the calculation method for the consumer price index. Under the new base year, the pace of decline in the core CPI slowed from 0.5 percent in June.

Ideas:

The Bank of Japan has been trying for a very long time to get inflation to 2 percent but hasn't been able to reach its target goal.

I don't see this as a failure of the Bank of Japan, I see it more as a structural challenge and or the Japanese economy is just not setup or structured like the US or even the EU economies.

For inflation to fully be able to change up or down, the economy needs to be in some kind of equilibrium, meaning, in this case, there is not full participation of all groups in the economy for consumer spending to reach its potential.

For example, women workers in Japan, most likely, are not working at their full potential, as some or many are working at low skilled jobs, underemployed jobs, or part-time jobs, and as such their salaries are not where they should be for their skill level. 

So as a result, a large part or group of the Japanese economy is unwilling or unable to spend up to their potential, thus might reduce consumer spending in the Japanese economy.

But at the same time, even if inflation was able to reach the 2 percent level, then the Bank of Japan has to begin to think about those on lower salaries and or those on fixed incomes if inflation begins to get too high for them.

So inflation can be both a positive and a negative in an economy. Inflation at the 2 percent level might show or indicate a good level of demand or economic activity in the economy.

And below that, say 1 percent might indicate the demand in the economy is not where it should be or not what it could be .

Article:

The data reinforces the view that Japan is unlikely to see inflation accelerating and the BOJ will need to maintain its ultraloose monetary policy for an extended period.

That contrasts with the United States which has been hit by inflation worries. The U.S. Federal Reserve is thought to be preparing to start stimulus tapering as early as later this year.

Mobile data usage fees, which are given more weight in calculating the CPI than before the latest revision, tumbled 39.6 percent in July from a year ago as major Japanese carriers now offer cheaper plans after facing mounting pressure from the government.

But higher energy prices and accommodation fees had a positive effect.

Ideas:

The ultraloose monetary policy can be both a positive and a negative. For banks and other it could be a negative if the Bank of Japan or the Japanese government doesn't provide subsidies or help if potentially banks are losing profits are lower interest rates.

At the same time, it can also be a negative, if the ultraloose policy encourages too many companies or families to continue to borrow extra money when means now potentially they are acquiring even more debt.

Extra or more debt can "crowd out" extra spending in the economy if businesses or families are worried about too much debt and or don't have enough extra money for using it in the economy.

If mobile fees were too high then then its a good thing that they are being lowered for consumers in the economy.

However, the companies will find ways to make up for the reduced data usage fees and charge consumers higher prices in other areas, either services and or other products.

Energy prices are very volatile as they are subject to global supply and demand. But an increase in energy prices should never be thought of as a solution to higher inflation.

There are always positives and negatives in anything that happens in an economy. Higher prices might be good for suppliers as maybe they now can get higher profits, but not so good for consumers of the energy as now they have to pay more. And if this means gas, oil, energy for some homes or cars etc., and if they are on lower incomes or fixed incomes it can be a real economic problem for them.

And maybe for some businesses, especially during the pandemic, if there profits margins are already too tight. An increase energy prices might be too much for some.

If accommodation fees means higher hotel fees, then most likely there might be more domestic travel now and hotels are upping their fees and demand increases. But they need to be very careful as consumers are still weary about the pandemic and maybe for some, if a  hotel has too high a price they will find another hotel and or not travel at all.

But if these hotels of course cater to the rich or upper class then they won't care too much about the hotel rates.

Article:

Rising crude oil prices led the kerosene price to jump 25.2 percent and gasoline to rise 19.6 percent, ministry data showed.

Accommodation fees gained 17.3 percent as hotel operators imposed higher prices with the number of customers increasing from a year ago due partly to a four-day holiday that coincided with the opening of the Tokyo Olympics.

The government's subsidy campaign to spur local tourism was launched in July last year, triggering sharp falls in accommodation fees. It has been suspended nationwide since last December amid a resurgence of COVID-19 infection cases.

Ideas:

Again energy sometimes are influenced a lot by supply and demand in the global market. And if they become too high in a country some groups or even businesses might be stretched because of the higher energy prices.

For example if gasoline prices, for consumer using cars, become too high they might then begin to think, if they can or could to consider using more public transport instead of driving their cars everyday.

The use of cars increased a lot in Japan increased a lot since the pandemic began as workers and others didn't want to be on crowded trains or subway systems.

But that can easily change if suppliers don't keep gas prices to an optimal or equilibrium level.

Yes its supply and demand but in some ways it might not be right that whenever there is a holiday period, some special event etc. hotels or other feel they need to increase prices if there is an increase in demand. 

There are already going to get more sales and customers so why the need to "price gouge" for lack of a better phrase or take advantage of consumers or customers.

The campaign last summer was probably a good attempt to encourage travel but it came at the wrong time and the pandemic was far from over as it is now.

But now at leas more people are vaccinated and its estimated up to 49% of the Japanese population have been vaccinated.

Article:

"The impact of mobile phone fees is large," said Junichi Makino, chief economist at SMBC Nikko Securities Inc. "Excluding special factors such as the lowering of mobile fees and the 'Go To Travel' campaign, however, the core CPI is up 0.5 percent."

"Although severe macroeconomic conditions continue, the CPI data does not change our view on the underlying price trend...and Japan is not headed toward deflation," Makino said.

Japan is still struggling to rein in coronavirus infections due to the spread of the highly contagious Delta variant. The Japanese economy eked out growth in the April-June quarter driven by strong exports and capital spending, though private consumption remained weak.

Ideas:

The decrease in mobile fees, despite helping everyday families and consumers, the lower fees might mean more extra income which means potentially consumers might use the savings from the lower mobile fees now in the economy which in turn increases overall demand in the economy.

If they core CPI did increase by as much as 0.5 percent, then that's a good thing. But the real challenge is if it can be continued into the future.

Japan might not be headed to deflation or lower prices but that doesn't mean consumer demand is where it should be. Consumer demand in the Japanese economy is way below where it should be and most likely won't be anywhere near its potential until the pandemic is over.

As mentioned in other articles, while exports increases are good and very much needed, they are unable to carry the Japanese economy as its estimated that exports might only account for 20 percent of Japan's GDP while consumer spending is estimated to be 50 percent of GDP.

Any increase in capital spending is good as it shows or could show businesses might be feeling good about the future or at least for their business or industry.

Article:

Concerns have grown that surging raw material costs could squeeze profits at Japanese companies as economists say many are reluctant to pass on those higher costs to consumers.

"We will have to closely watch how energy prices move," a ministry official said.

So-called core-core consumer prices, excluding fresh food and energy items, dropped 0.6 percent for the fourth straight month of decline. 

Ideas:

Yes, companies that see their suppliers increase their prices might be concerned about "passing on" the increased supply costs to the next in line because of consumer demand is not where it should be, whether that is supplies to other companies or whether that is to the final retail customer in the supply chain.

As such profit margins might be less than wanted or needed for a company to grow or even stay in business.

Eventually overtime companies may have no choice but pass on some or all of the costs to the next group in the supply chain.

Core-core consumer prices might have dropped 0.6 percent but the real question, for those that matter, did they see a decrease in prices.

Again an economic activity can be both a positive and a negative. 

For consumers of course they might see it as a positive but for the suppliers they might see it as a negative as most likely their sales and profits didn't increase.

Have a nice day and be safe!