Japan's Core Consumer Prices:

 https://mainichi.jp/english/articles/20210924/p2g/00m/0bu/031000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices were flat in August from a year earlier with a record drop in mobile phone charges offset by sharply higher accommodation fees and surging energy prices as the economy gradually recovers from the pandemic, government data showed Friday.

The latest consumer price index, coming after 12 months of decline, does not change expectations that the Bank of Japan will maintain its monetary easing as its 2 percent inflation target is still far off.

Despite its peers in the United States and Europe preparing to gradually wind down stimulus amid the prospect of accelerating inflation, the BOJ does not see a similar urgent need even though higher energy costs have lifted Japan's core CPI.

Ideas:

While the overall core consumer prices might have been flat in August doesn't mean all prices didn't change. As a market economy is very complex there might be no change in some or many prices and there might changes in some due to demand and supplier costs.

Mobile phone charges might be falling but the mobile phone companies will find ways to make up for the losses charges with higher fees in other areas to make sure they can keep the same or similar profit margins and not lose anything.

The increase in accommodation fees seems not appropriate at this time, if it means hotels and other type places. Demand for travel and such doesn't seem to be back to normal or even near normal at this time.

And with energy prices, they are extremely volatile meaning suppliers and such are highly dependent on the global energy market, which means the customers or supplier are then dependent on what suppliers do. As such as energy suppliers have no choice but pass on the increase in energy prices that means the users of the energy, such as oil and gasoline are now going to have to pay more too.

The Bank Japan, at this time, would be wise to concentrate, as much as possible, on helping those businesses and families who are still having challenges because of the pandemic as for example there are many businesses and industries that are still struggling and for some there is no end in sight or no light at the end of the tunnel just yet.

The US and the EU might be winding down their stimulus programs but it a little too early for Japan to do the same.

There are many parts of the Japanese economy such as the services industry, not to mention the tourism businesses are are far from out of the pandemic at this time.

Article:

Tracking higher crude oil prices, energy prices gained 5.5 percent from a year earlier with those of kerosene surging 20.0 percent and gasoline jumping 16.9 percent, according to the Ministry of Internal Affairs and Communications.

Accommodation fees were another positive contributor, up 46.6 percent, the sharpest increase on record, the ministry said.

The sharp gain came in response to a plunge in fees charged by hotel operators under the government's "Go To Travel" subsidy program to spur local tourism that began in late July last year. The program was suspended nationwide in late December amid the spread of the coronavirus.

Ideas:

Japanese suppliers who are dependent on the global energy market are not going to just sit on the higher prices they have to pay bring the energy commodities to Japan and they will and have passed on the higher prices to those in the supply chain.

And again, why the sudden increase in accommodation fees when maybe travel and tourism is not yet back to pre-pandemic levels. 

And it can't be said that domestic travel alone carry the tourism market. But if you add in the decrease in fees last year because of the "Go To Travel" subsidy program then that might be enough for hotels to increase their fees at this time, as they now need or want to make up for a loss of revenue due to the suspension of the subsidy program.

Article:

A big drag was mobile phone fees, which tumbled 44.8 percent, the largest-ever drop, with the negative impact expected to continue as major carriers started offering cheaper plans this spring under government pressure.

"Absent the impact of mobile communications fees, the 'Go To' program, and energy prices, the price trend should be positive, rather than negative," a ministry official said.

The BOJ expects the core CPI to gain 0.6 percent in the current fiscal year through March.

Ideas:

While carriers might be offering cheaper plans they will find ways to make sure their profit margins are not compromised. Which means they will find other products and services that they will rise prices on to offset the cheaper plans.

The expectations of the price trend to increase might be there, to be fair and honest, where are the prices going to increase? There have been some articles recently that have talked about increases in food prices as suppliers can no longer absorb the higher prices they have to deal with and such now need to pass on the higher prices to the next in the supply chain.

A 0.6 percent increase in the core CPI might sound good and might be good, but how really is that? Is there a for example a 0.6 percent increase in demand or is it a 0.6 percent increase in supply costs that have been passed on the those next in the supply chain?

Article:

Toru Suehiro, a senior economist at Daiwa Securities Co., said further rises in the core CPI may be limited given that the pace of gains in energy prices has been slowing.

"We need to see whether prices will go up in the service sector helped by pent-up demand," Suehiro said, referring to an expected recovery in demand suppressed by the pandemic.

"There is also a possibility that firms (in the service sector) will compete to capture such demand by cutting prices," Suehiro added.

Ideas:

Energy commodity prices are very volatile meaning they change very quickly up and down. At the same time for the core CPI it might not be a good idea to track core CPI and consider the changes in energy prices. Yes, energy suppliers need and do pass on their prices to those next in the supply chain including for example food manufacturers who use the energy and as the energy suppliers have to pass on their higher prices to those next in line such as the food manufacturers then of course the food manufacturers are going to pass on their higher prices to those next in line such as supermarkets and other places and then of course the supermarkets will have no choice but to pass on their higher supply costs now to the regular customers or consumers.

Yes, as the emergency situation has been reduced it will be interesting to see how much demand in the services sector area will return, how fast it will return and how much, and yes is there really a lot of pent-up demand as mentioned.

For example a source in Yokohama who was in the Yokohama eki, station area said there were already a lot of stores that were having sales as they were trying to get some of the so-called pent-up demand that might be there.

Article:

Robust exports helped manufacturers that have played a key role in Japan's economic recovery from the pandemic fallout. But service providers have lagged amid the spread of the highly contagious Delta variant that has led COVID-19 restrictions to remain.

So-called core-core consumer prices, excluding fresh food and energy items, fell 0.5 percent, down for the fifth straight month.

Ideas:

Export growth has been very good. But it must be remembered exports alone is not going to grow the economy and get the Japanese economy back to the pre-pandemic level.

Exports themselves might be at or better now that the pre-pandemic level if you don't take into account the global chip shortage.

But the Japanese economy is not the Japanese economy of the 80's when manufacturing was a big part of the economy.

The Japanese economy has now grown into a full service economy with services and technology now contributing a bigger role or a bigger part of the Japanese economy overall.

Exports for example are only about 20 percent of Japan's GDP while consumer spending, which is linked to the services sector make up about 50 percent of Japan's GDP.

So while exports are very important they can't be expected to get Japan out of the pandemic alone.

The services sector area needs to make a full or almost full recovery before the Japanese economy can get back to some normal or a "new normal." 

Have a nice day and be safe!