Bank of Japan:

 https://mainichi.jp/english/articles/20211028/p2g/00m/0bu/031000c

Article:

TOKYO (Kyodo) -- The Bank of Japan on Thursday trimmed its economic growth and inflation forecasts for the year through March, keeping its ultraloose monetary policy intact to buttress a fragile economic recovery from the COVID-19 malaise.

The BOJ gave the bleaker economic outlook after a two-day policy meeting, as parts shortages have hit automakers such as Toyota Motor Corp. that have been forced to cut output. COVID-19 restrictions that were in place until recently have delayed a recovery in the services sector.

The Japanese central bank said the economy will likely grow 3.4 percent, rather than the 3.8 percent projected in its previous policy-setting meeting in July.

Ideas:

Central Banks,the IMF, OECD and others are always changing economic growth forecasts as an economy is always in a state of change. An a economy is living organism that is very complicated as there are many moving parts.

As such central banks et al. are always watching, thinking, sometimes decide the update their forecasts.

Forecasts are nothing more than estimates or maybe another word might a guess and what might happen in the future.

It's a good idea that the BOJ is keeping an ultraloose monetary policy as there are many parts of the Japanese economy that are not even near the pre-pandemic level.

As yes, some areas might be doing OK but there many parts beginning to improve but still very vulnerable in case another wave hits Japan like is happening globally such as Germany and Austria, South Korean, and even some parts of the US still.

While a 3.4 percent growth may sound good, and hopefully it is, but again is just an estimate or just a guess. Even the BOJ doesn't know 100 percent what is going to happen in the future. 

At the present time, globally, there is still too much uncertainty, with an apparent 5th or 6th wave hitting some countries.

Japan might not have a lot cases now, or the cases are being unreported, the idea that Japan is all in the clear is not the best way to think just yet.

Article: 

Core consumer prices excluding volatile fresh food are forecast to stay at 0.0 percent, lower than its earlier projection of a 0.6 percent increase.

The BOJ kept its "yield curve" control program to set short-term interest rates at minus 0.1 percent and guide 10-year Japanese government bond yields around zero percent to keep borrowing costs low for companies and households.

"Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad," the BOJ said in maintaining its assessment.

Ideas:

There are both positives and negatives to the core consumer price index being at 0.0 percent.　For consumers of course they want the lowest prices possible, on quality products. And companies are away that Japanese consumers are elastic in that they don't want to pay higher prices if they don't have too.

The negative of course is companies and supermarkets and others have to maintain a lower price than maybe need or want to because of risk adverse consumers. So they are most likely very reluctant to pass on their higher costs to the consumer.

The BOJ might not have a choice but to keep a zero percent or even a minus 0.1 percent strategy for sometime as the Japanese economy might be in the fragile zone for the next six months or even longer.

The economy might have picked but yes still in a very severe condition. Globally as some countries are now beginning to experience a 5th or 6th wave Japan shouldn't be complacent and think its in the clear. Just a few month ago maybe Germany, Austria and other EU countries might have thought the same thing.

Article:

Taking a hit from supply-side constraints, exports and industrial output have been "weak" in some areas, though they have continued to increase, the BOJ said, changing its wording from "affected."

The growth outlook for the year from next April, however, was upgraded to 2.9 percent from 2.7 percent in the latest economic outlook report.

The BOJ stands in sharp contrast with its peers like the U.S. Federal Reserve and the European Central Bank, which are increasingly facing the risk of inflation and the need to ponder scaling back crisis-mode support. The U.S. central bank's policy meeting is coming up next week.

Ideas:

Exports might be weak but they are still a solid growth engine for Japan. But as in any economy, exports a not the main economic driver and even manufacturing now in the 21st century in Japan is not the main growth engine.

They are both very important growth engines but they are not the entire economy. The Japanese economy, as any economy today is a very complex living organism, meaning it's not about numbers and statistics, it's about people and how they interact.

If the Japanese economy does reach the 2.9 percent level it a good growth level for the Japanese economy. But it has to be remembered, just how bad 2020 was. So 2.9 should be seen as very good, but at the same time maybe just making up for the less than good 2020.

The BOJ and the Japanese economy seems, for many reasons, to now always follow the same path for economic growth or even risk factors that the US or the EU has to deal with.

While inflation might be at record levels in many countries in including South Korea, which  the BOK is most likely going to increase in key interest rate, Japan and the BOJ seem to have a different and understandable mindset, as needed. for Japan's unique conditions.

Article:

No surprises had been expected in the first BOJ policy meeting since new Prime Minister Fumio Kishida took office in early October.

Kishida, who is now aiming to win a majority in Sunday's House of Representatives election, has stressed the need to keep monetary easing in the crisis situation and for the central bank to stick to the 2 percent inflation target.

But opposition parties claim that bold monetary easing under "Abenomics," an economy-boosting program launched by former Prime Minister Shinzo Abe, did little to boost inflation expectations, taking issue with the absence of an exit scenario.

Ideas:

Any monetary policy action is always to have some negative and positive effects. It's never a zero sum game, meaning whatever the BOJ does or any central bank does is never go to be positive for all the actors in an economy. 

An economy is just to complex and too complicate for a central bank to be able to change or fix with one change of a monetary policy.

While the idea of sticking to the 2 percent inflation target might be a continued good strategy, which the BOJ has been attempting to do since around 2014, the BOJ hasn't had much success in reaching its goal.

And it's not the BOJ's fault, and maybe inflation might be considered as two sides of a coin. One side might be consumer spending and inflation and on the other side might be producer inflation or the increase of producers prices. Which in many cases might be passed on to consumers and or next in the chain.

While producers prices and those related have been increasing in recent months, producers and others might still be reluctant to pass on the increase of their costs to the next in the chain which eventually reaches the consumer, as they know Japanese consumers are very risk adverse or can we say very elastic shopper as any increase in price might turn them off from buying

So as consumer spending is a much as 50 percent of Japan's GDP, it might never reach its fullest potential for the BOJ to reach its goal of 2.0 percent inflation.

While producer inflation might reach or be a the 2.0 percent level now, consumer spending is well below that at this time.

Article:

Inflation is not an imminent risk in Japan where the core consumer price index is just above zero percent and is projected to rise about 1 percent during Governor Haruhiko Kuroda's term to April 2023, the latest report showed. This bolsters the case for the BOJ to keep its easing steps and diverge from the Fed and the ECB.

The recent sharp drop in COVID-19 cases and progress in vaccinations have raised hopes for a further reactivation of the economy. The combination of a shortage of parts, higher energy and material costs as well as a weaker yen, however, is making things difficult for the BOJ.

The BOJ will continue to buy exchange-traded funds with an upper purchase limit set at 12 trillion yen ($106 billion) a year. The policy board also decided to keep funding support for struggling firms amid the pandemic.

Ideas:

Yes it might be said that inflation overall is not an overall risk, that doesn't mean anyone or everyone is not experiencing some kind of increase in prices. Again as an economy is very complex there might be some businesses such as restaurants that had to absorb the increase of prices passed on them from their suppliers.

As such, they might be reluctant to pass their now increase in prices to their risk adverse customers and accept they are going to have slimmer profit margins. So while the customer at the restaurant might not see an increase in prices the producer or supplier did but passed on their increase in prices to the next in line to the restaurant who now has to deal with an increase in prices and a thinner profit margin.

There might be and hopefully so a reactivation of the Japanese economy, but by how much as there are many parts and mainly the services area which might take a long time to recover.

And of course the shortage of parts, the higher energy and material costs are going to and is slowing down full recovery.

The BOJ should continue to help businesses as long as is needed. As again, its seems this pandemic nowhere finished, as it has again expanded in many EU countries and could just as easily come back to Japan. 

Article:

Kuroda is scheduled to explain the policy decision at a press conference later in the day.

The BOJ said the CPI has been pushed down significantly by sharply lower mobile charges, but it is expected to increase toward the end of this year due to higher energy prices. Major Japanese carriers started offering cheap plans in the face of government pressure.

On the one hand, positive CPI numbers come as a relief to the BOJ as it battles to accelerate inflation toward 2 percent in a country known for years of deflation. But on the other, households are sensitive to higher prices, which economists say could hurt consumer sentiment when domestic demand lacks strength.

The yen's weakness also cuts both ways as it boosts exporters' overseas profits when repatriated but also raises costs for importers. The U.S. dollar recently hit a four-year high in the upper 114 yen zone.

Ideas:

While Suga and his administration moved to get Japanese carriers to reduce their fees and offer cheaper plans, it can be expected that the carriers are going to find ways to maintain their profits margins by increasing the prices and fee in other areas of products and services.

As written before maybe the measurement of energy prices and how they effect consumers should be in a different measurement and not linked with the CPI.

Yes there are family electricity and gas bills but maybe they should be in a different category?

Consumer sentiment most likely is going to be effected it families begin to experience significant increases in electricity and home gas bills and of course higher gas price for driving their cars.

In can only dampen or reduce consumer spending in the Japanese economy as now families and consumers now have less disposable income to spend because of higher energy prices.

And then if they begin to see higher prices at restaurants, stores and other places that might dampen their mood even more to spend.

But to add a positive here, as we move more toward and into December and the holiday season and yes in Japan, as the Christmas season seems to be everywhere there and then of course the week long New Year holiday in Japan, a negative shopping mood might not take effect until after the week long New Year period.

The weak yen is yes both a positive and a negative.Whether good or bad, that is a market economy, as a market economy is very complicated and there are many economic actions taking place which are never always positive or always negative.

Have a nice day and be safe!

Japan Economy:

 https://mainichi.jp/english/articles/20211027/p2g/00m/0bu/028000c

Article:

TOKYO (Kyodo) -- The Japanese government on Wednesday downgraded its overall assessment of regional economies for the first time in 18 months, as a global chip shortage and supply chain disruptions weigh on the auto industry.

The pace of recovery in regional economies is "moderating" partly due to supply constraints, the Finance Ministry said in a report that is part of its quarterly assessment covering Japan's 11 regions, changing from the previous view in which it said they are "recovering although weakness is seen in some sectors."

Ideas:

While its good that many so-called regional economies might rely on manufacturing  such as those who rely on semiconductor chips, its not so good that the manufacturing sector might the only sustainable growth engine for a region. 

Yes farming might be important in many of the regional economies, and as much as possible, an region or prefecture should try to balance out its growth engines and not rely on manufacturing only.

And its easier said than done, and no doubt all regions know it. Perhaps, of course they have tried a lot over the years, before the pandemic in increase tourism to their region.

And no doubt, which is unique somewhat in Japan is the number of small and medium sized businesses that are either suppliers or connected with many larger manufacturing companies.

Article:

It was the first downward revision since April last year when the Japanese economy was experiencing a serious slump caused by the initial impact of the coronavirus pandemic.

The October report said car production is "pausing" as the worldwide semiconductor crunch, along with parts shortages caused by factory shutdowns in Southeast Asian nations where virus cases have surged, have been forcing automakers to cut output.

By region, the ministry downgraded assessments for four regions, while maintaining those for six regions including the Kanto and Kinki areas centering on Tokyo and Osaka.

Ideas:

This might be a good example for regional economies, as much as possible, to try and have a more balanced economy, and not rely only on manufacturing as its growth engine.

First there was the overall pandemic that might have stalled or slowed manufacturing in many regions. And now there is the chip and raw material shortage that is continuing to slow stall manufacturing in the regions.

So what can regional economies do to achieve a more balance economy that is not just manufacturing or even farming or agriculture? That is the main question that probably many regional economies have been asking for years, as maybe they see the continued decrease young people, human resources, who flock to the larger cities of Sapporo, Tokyo, Osaka, Nagoya and so on.

The chip shortage, according to reports related to Toyota, might easing some, but that doesn't mean everything will be back to normal anytime soon. 

An article in the BBC, when the chip shortage became global, stated that one German car CEO stated the shortage could be around for up to two years.

And then there is the continued raw material shortage which will continue to effect businesses.

Article.:

The downgraded areas such as the regions of Tokai in central Japan and Chugoku in western Japan are heavily reliant on auto manufacturing.

Only the southern part of the Kyushu region was upgraded. An official at the ministry told reporters output of electronic components and chip-making equipment has been brisk in that area of southwestern Japan.

The pace of individual consumption is also picking up "moderately," the report said, adding that spending on accommodation and food services "remains in a severe condition."

Ideas:

An economy is very complex and all regional areas or economies are not the same. Not even in a normal market economy with no pandemic there are always going to be some areas doing better than other areas, or some areas will grow faster than other areas.

Its seems normal that any area with companies that are actually making chip-making equipment are showing strong growth. As most likely in Japan, and globally, there are might be some new companies that have decided to produce chip making equipment.

Most likely the days are gone when only a few companies dominate a market related to an area such as chip making.

Individual consumption or consumer spending might be picking up but how long will it last or can it last with the increase prices in Japan? As producers and others pay more and more for their raw materials and pass them on those next in line and then eventually the regular consumers can the trend of increased consumer spending continue?

As the emergency measures were reduced in November might continue and even in the December and New Year's holiday period, but what about after that?

And yes the services sector is and mostly likely will continue to be the weak link in the Japanese economy. Some domestic tourism might pick up such as going to Okinawa and or to the mountains for skiing but it will continue to remain weak for some time.

And then there is the idea of international tourism. While Japan just announced now up to 5,000 per day can enter Japan, it is no intended for tourists but business people and students who plan to study at a Japanese university or a senmon Gakko ( technical college, trade school, language school).

For a  year that is about 1,825,00 people allowed to enter Japan. Japan used to get that amount in just two months. So a lot has to be done to get Japan back to its pre-pandemic level.

Article:

The report, meanwhile, said business at hotels, restaurants and department stores is on the increase recently, following a sharp fall in new COVID-19 cases and subsequent lifting of the government's state of emergency across the country on Oct. 1.

Employment conditions show some weakness due to the pandemic, although the number of job offerings is solid especially among manufacturers, the ministry said.

Ideas:

Yes, there might be on an increase but by how much. As it is enough to get these services type businesses back into the black or profitability zone. Hopefully consumers through the holiday season which include the weeklong new year period will continue spend despite the overall increase in prices now trending in Japan.

Manufacturing in the pandemic and before the chip shortage, was able to come back very quickly as it was not so much a person to person contact business like the services businesses that rely on person to person contact, unless of course, it they can or could, such as department stores or others have innovated and moved on with online platforms to survive and restaurants and similar businesses have moved into takeout and delivery type businesses to survive too.

It is possible that it might take some service type companies up to six months or more to recover back to the pre-pandemic level.

But then there is JAL and ANA, which feel they are not going to recover anytime soon, and have taken a rather non-Japanese approach to reduce their workforce over the next five years.

But they at least are not talking layoff or firings but reducing their staff through hiring less new workers along the normal retirements over the next five years.

One idea might be that now many companies have not gotten used to Zoom or Microsoft teams meeting with customers and clients and don't see the need to fly all over Japan, except for the first initial meeting which is sill very important in Japan.

And maybe there might be less customers/passengers on the shinkansens that go everywhere in Japan;

Have a nice day and be safe!

 

Weak Japanese Yen:

 https://mainichi.jp/english/articles/20211021/p2g/00m/0bu/021000c

Article:

TOKYO (Kyodo) -- A weak yen typically serves as a boon to the export-driven Japanese economy. But when combined with surging crude oil and raw material prices, it leaves the economy facing a double-whammy that is set to crimp the economic recovery from the pandemic.

The yen's recent slip to a nearly four-year low against the U.S. dollar coupled with a surge in U.S. oil prices to a seven-year high threatens to cut into household spending even as it still feels the impact of COVID-19.

The combination is also set to make even more apparent the divergence between companies that have enjoyed a recovery from the pandemic fallout and those that have not, economists say.

Ideas:

An economy is a very complex system and what might be a positive from one part of the economy might be a negative for another part of the economy.

Even before the pandemic the Japanese economy and society, some parts always do better than other parts of the economy.

 But unfortunately the pandemic has increased the differences between different parts or sectors or industries that are doing better compared those sectors or industries or even those in society that aren't.

A week yen is usually very good for exporters and they can receive more for the products they ship overseas. A strong yen usually favor importers as they have to pay less for what they receive overseas.

So now there are competing economic action taking place in the Japanese economy. While exporters might feel good about the weak yen, they probably don't feel good about an increase in oil prices and raw material prices, which means their costs are now increasing.

So whatever benefit they receive from the weak yen they might lose some or part of that because of increased costs due to energy prices and  raw material prices.

And so its very possible now they might try to pass on their increased costs to those along the chain which means its possible it could eventually reach the regular consumer in the economy, which means it could reduce or limit consumer spending just after the Japanese government reduced the emergency measures.

And of course there are the importers, who don't usually like a weak yen, which means they now have to pay for the products they receive from overseas, and add in the increase in energy and raw material prices and it is definitely a major problem for importers, who again might try to pass on their increased cost to those next in the chain and again might reach the regular consumer eventually.

Article:

The yen's weakening raises prices of imported products such as oil, putting Japan at serious risk at a time when the resource-scarce county saw import prices rising at the fastest pace in four decades last month.

Wholesale prices have also been gaining sharply, testing the tolerance of Japanese companies that have opted to absorb higher costs rather than pass them on to consumers. Some food and gasoline prices are already beginning to tick up to put pressure on consumer spending.

"The weak yen may not be wholly negative for companies but it is of little benefit for households when wages aren't rising much," said Shunsuke Kobayashi, chief economist at Mizuho Securities Co.

Ideas:

Just at the Japanese government measures have been greatly reduced the idea was/is the economy will be eventually get back to the pre-pandemic level. 

But unfortunately what is happening now might limit or delay the Japanese economy from getting back back to the pre-pandemic level.

Consumer spending has always been a major challenge for the Japanese government and the Bank of Japan as Kuroda and others in the BOJ keep trying to increase consumer spending and get the overall inflation rate to the 2.0 level, without much success.

And now with an increase in energy prices and raw material prices, and then add in a weak yen, tip the balance of power in the Japanese economy to now where Japanese companies and especially importer have no choice but to pass on their increased cost.

Japanese companies recently have been reluctant to pass on the costs as they are all to aware how Japanese consumers and other along the supply chain line are to increases in prices. But now they might not have choice if the energy and raw material prices keep increasing.

Yes of course if wages in Japan are not increasing that means consumers in Japan now have even less disposable income or extra income to spend in the economy, which further decreases consumer spending.

The Bank of Japan and Kuroda have been trying since 2014 to get companies to increase the wages of their employees, as they are for the most part, just sitting on huge cash deposits in the banks, for were before the pandemic.

One of the strategies of the Bank of Japan, as an incentive to get companies to use the money they have in the banks, was to implement a negative interest rate policy to get companies to use their money in the Japanese economy buy increasing the wages of their employees.

As employees get increases in their wages they might be feel better about their wages and might begin to use more of what they have by spending more, thus increasing consumer spending, and as demand increased in the economy, inflation might begin to move toward the 2.0 level that the BOJ has been trying to get to since 2014 or even earlier.

Article:

"The situation would be different if the trickle-down effect was working," Kobayashi said in reference to growth in corporate profits translating into higher wages for workers.

The Japanese currency has fallen by nearly 4 yen against the dollar since early October when Fumio Kishida became Japan's new prime minister with a pledge to ensure growth and redistribution.

As the Federal Reserve is expected to wind down crisis-mode stimulus, long-term U.S. Treasury yields have been on an uptrend, leading the U.S. currency to rise sharply against the yen.

With ample liquidity injected via monetary easing by major central banks, surging crude oil prices are also driving the yen's fall as analysts say selling currencies of energy-scarce nations such as Japan has gained momentum.

Ideas:

The Korean government, as an example, has tried to implement a trick-down effect the past four years by putting in law an increase in the minimum wage or living wage for part-time worker, contract workers or low working in low-wage jobs, with the idea as workers now have a better income they might begin to spend more in the economy.

But it hasn't worked as planned. An increase in the minimum wage is/are increased costs for businesses and especially small businesses who are operating on very slim profit margins.

As a result of the increased minimum wage, which has been increased every year the past four years, many or some small businesses have had to reduce the part-time or contact employees they have and or cut the hours those kind of employees. 

For example many convenience stores in Korea, like conbinis in Japan are franchise oriented businesses meaning they might be operated by a husband and wife and a few part-time workers. But because of the minimum increase they might be operating with only the husband and wife.

While not exactly the same as Japan, where many of the mom and pop conbinis can't find part-time workers they too have to operate with the husband and wife only and because they can't find PT workers they might have to cut or shorten the operating hours or the conbinis which the franchisee such Lawson, Family Mart,  Mini Mart and of course 7/11 doesn't like.

And again the idea of the Korean government strategies has been to try to re-distribute wealth in a country that has a huge gini coefficient where there is a large gap between those in big companies and everyone else. But it has mostly been a failure.

So Kishida, while very noble and a good idea might not work unless his cabinet has some very innovative ideas that other countries haven't tried before.

But he could try to see what the Northern European countries have done which might be a good model in how to do it. But even now those countries are beginning to see even wider gaps in inequality.

Article: 

"There is no doubt that rising commodity prices are severe if we look at the structure of the Japanese economy," Kengo Sakurada, chairman of the Japan Association of Corporate Executives, told a recent news conference. "I feel there are strong concerns (in business circles) about competitiveness and higher costs."

With the benchmark West Texas Intermediate crude oil futures topping $83 per barrel, the highest in seven years, the dollar climbed closer to 115 yen, a level it last reached in 2017 during the time of "Abenomics," a policy mix of bold monetary easing and fiscal stimulus implemented under former premier Shinzo Abe.

The dollar is at much higher levels than the average assumed exchange rate of 107.64 yen for the current business year through next March in the Bank of Japan's latest Tankan survey. Leading Japanese exporter Toyota Motor Corp., for example, has set its rate at 105 yen.

Ideas:

So while the pandemic in Japan might be winding down, but not so around the world as other countries, especially in the EU and Germany, now Japan may be facing a new economic crisis, that it has to manage or work its way through.

The Bank of Japan might have a choice but to continue with some bold monetary easing strategies while other countries such as the US are beginning to tighten their monetary strategies.

The latest challenges in the Japanese economy might have the potential to force the economy back into another recession.

As such the Bank of Japan and Kuroda needs to think of some bold strategies to make sure the economy and that there is enough economic activity to keep the Japanese economy from moving back into a recession.

To remain competitive globally and even in Japan Japanese companies might have to keep their prices at the the competitive level despite an increase in costs. If they really do have the huge sums or cash in the banks, as reported many times, then it might be possible to smooth through the current economic and businesses challenges without a serious fallout.

Of course that can't be said for medium or small global manufacturers as they most likely don't have the resources that the large Japanese companies do.

Article:

The current levels may be good news for exporters and companies that do business overseas or have subsidiaries because a weaker yen strengthens the price competitiveness of Japan-made products overseas and inflates profits earned abroad when translated back into the Japanese currency.

But it is a different story for companies that are reliant on imports such as food ingredients and petrochemical products or deal with consumer products, as a further weakening of the yen would exacerbate the pain of hefty costs.

Martin Schulz, chief policy economist at Fujitsu Ltd., said the dollar has been trading "at a comfortable level" for Japanese exporters. But investors are now concerned that a higher dollar above 114 yen will push energy costs too far and squeeze profits at import-driven companies.

Ideas:

An economy is very complex and Japan's economy is no exception, as there are always competing economic challenges in any economy. As such importers and exporters have competing priorities and challenges compared to each other.

While exporters might be feeling good, even though they too might have higher energy costs to run their manufacturing plants such as the car companies they might be trying to rationalize or see because of the weak yen, the extra profits they receive from overseas might offset the increased energy costs needed to run their manufacturing plants.

Of course the situation is much different for importers. Again they are facing a double or even a triple threat of a weak yen, increasing energy and raw material supply costs, and how much of the costs, should they pass on the next in line in the supply chain, and of course eventually reaching the regular consumer.

So the Bank of Japan needs to be aware that the Japanese economy is not just the exporters who bring money in the Japanese current account, but there are many companies if not thousands or even millions that are also part of the Japanese economy and the BOJ needs to find way to help them now during current economic crisis.

The BOJ can take two approaches to the current economic situation. It can take a wait and see approach or a "let the market" fix itself, meaning see if the current economic challenges fix themselves such energy prices in Japan and globally get back to the level that they are a stress for companies and society.

And maybe the Japanese yen settles down to a more balanced level without a lot of BOJ action.

But the Japanese economy and the current situation might be beyond the point of just let the market/markets fix themselves naturally it might be time for the BOJ to take some kind of action to help importers, if anything can be done at all such as subsidies to companies to reduce their stress relate to the increased cost.

Article:

"Since the economic restart comes later in Japan than in the United States and Europe, the current cost-push from energy and material costs is unlikely to create a significant inflation scare anytime soon," Schulz said.

"The bigger concern on the economy side remains to be the pressure on corporate profits, which can easily turn into a correction of high stock prices."

Heading into the Oct. 31 House of Representatives election, Kishida was apparently alarmed by the rapid rise in crude oil prices, instructing his ministers to take necessary steps, including asking oil-producing nations to increase output.

Ideas:

Again there are always many things going on in an economy at the same time. Unfortunately stock holders and investors are not very patient. Many years ago it was common for Japanese companies to take a long term approach so they weren't as concerned about quarter to quarter results that they have to be today.

That creates a new set of priorities for Japanese companies as they no longer can take a long term approach, which though they might want or need to as the market today is only concerned about today. They don't care about five or ten years down the road. They want to see results now or this quarter.

The increase in output has always been challenging situation and even if oil-producing countries increased their output today doesn't mean Japan or other countries are going to see an immediate change or decrease in prices. It could take several months to see any changes.

Article:

Japan's core consumer price index, a gauge of inflation, was unchanged in August from a year earlier, far from the BOJ's 2 percent target, but is projected to pick up due to higher energy costs.

Economists say the recent surge in crude oil prices and the weaker yen will more than offset the impact of sharply lower mobile phone charges.

Consumers may start to feel the pinch in coming months. Gasoline prices are now at seven-year highs and prices of some imported food items such as flour and beef are rising.

Ideas:

This has been reported before and again maybe Japan's core consumer price index should not include changes in energy costs as they can skew or not provide the correct picture or story about what is going on with consumer prices. 

With energy prices include it might not give the correct picture as it might show an increase in inflation but not real prices that consumers have to pay.

Yes they have to pay for electricity and gas prices for their homes but they should not be included in with the the other things that regular consumers have to pay for.

So while Suga and his government forced or suggested that mobile phone companies lower their prices they charge consumers, the companies will find ways to make sure they keep their profit margins by increasing the prices or fees with other products or services.

In South Korea, for example, related to gas prices, the South Korean government is going to suspend the gas tax to lesson the burden on consumers over the next six months. Of course that means less government revenue but maybe the South Korean government felt it was needed instead of just letting the gas market fix itself and that might not happen in the near future.

The increase in raw material food prices are not good for companies, and again, eventually they might not have a choice and the have to pass on all or part of their increased costs to food manufacturers and then eventually maybe to supermarkets and restaurants and eventually to regular consumers.

And this has been reported before where some restaurants have now had to stop selling some of their menu items and the costs for purchasing them has become too much and they know the customers they have won't buy that item because the price is too high for them.

Article:

These headwinds come as Japan moves toward restoring normalcy to everyday life as the COVID-19 situation stabilizes, though experts warn of another wave.

"If the resumption of economic activity continues, companies may become more willing to pass on higher costs to consumers," said Kobayashi at Mizuho Securities.

Up until now, nonmanufacturers, especially service providers, had been expected to catch up with manufacturers in recovering from the pandemic as the economy emerges from COVID-19 restrictions on people's movement.

"The irony is that the weaker yen has the potential to widen the gap between winners and losers in the corporate sector," Kobayashi said.

Ideas:

Another wave is moving through the US and Europe now despite the opening on of the countries including international travel. And in Korea it looks like its in another wave despite the country reducing emergency measures at almost the same time as Japan.

This writing is late, on Nov. 18, there was  record number of cases in Korea that hasn't been seen since the beginning of the pandemic crisis. But so far the South Korean govt. hasn't signalled a return to any emergency measures

The services sector in Japan might take a long time to recover as its sector is much more complex than the manufacturing sector. The services sector includes anything that involves contact with people, and as such the pandemic effected it a lot.

For example one area of the service sector that might return soon is related to international tourism. When you have over a million international tourists entering Japan each month, that as a lot money moving into Japan and any company or business related to it.

As such JAL and ANA both say they will be in the red the next fiscal year and actually plan to reduce their staff over the next five years, as this is almost not done in Japan. So maybe JAL and ANA feel the pressure from stockholders related to the next fiscal years, instead of taking their usual long term or approach as JAL did to get out of bankruptcy a few years ago.

Yes, unfortunately the gap is going to get bigger in Japan between the so-called winners and the so-called losers.

If Kishida want to lesson the income inequality gap he need some innovative approaches to solve the problem.

Updated on November 18, 2021.

Have nice day and be safe!

Japan Car and Other Exports

 https://mainichi.jp/english/articles/20211020/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Japan's car exports in September fell 40.3 percent from a year earlier, as supply chain disruptions in Southeast Asia due to the coronavirus pandemic and a global semiconductor crunch forced domestic automakers to cut output, government data showed Wednesday.

Auto shipments marked the first year-on-year drop in seven months and the sharpest decrease since a 49.9 percent dive logged in June last year amid the initial shock of the pandemic, according to a preliminary report by the Finance Ministry, in a development that could put a damper on the nation's economic recovery.

The slump in car exports slowed growth in Japan's overall goods exports in the reporting month to a 13.0 percent rise from a year earlier to 6.84 trillion yen ($60 billion), compared with a 26.2 percent gain in August and a 37.0 percent jump in July.

Ideas:

There was a BBC article earlier that had a comment from an German carmaker spokesperson who said the chip shortage might continue into 2022.

Its kind of perplexing that there is even a chip shortage, and yes there have been challenges related to the pandemic and chip manufacturers having labor challenges with some or many getting the virus. 

Most what is interesting is there are many more manufacturing companies and others that haven't had the challenges related to the pandemic. So why is this situation specific to the chip industry and or even effecting the car makers and electronics manufacturers?

So what is unique for example, as to why there might have been or is a shortage in the chip manufacturing industry? For example, yes there might have been or is a large increase in demand for car and electronics. But was the demand that much?

Surely there have been periods of a sudden increases in demand and there were the delays or shortages seen now.

And then there is the idea of stockpiling or making extra as needed just in case of sudden increases in demand.

Perhaps the virus wave that swept through Taiwan and other places has been too much and possibly there was or never was the idea of stockpiling chips for large and sudden increases in demand and or companies have or were operating on the Toyota production model or "just in time" manufacturing meaning they only produce what is needed for now and not later to save cost.

But the chip shortage is definitely going to effect the Japanese economy's recovery and its going to take much longer to get back to the pre-pandemic level.

Article:

Goods exports nevertheless saw a double-digit percentage increase for the seventh straight month, according to the ministry.

Imports expanded 38.6 percent to 7.46 trillion yen, up for the eighth month in a row, mainly pushed up by surging prices for crude oil purchased from producers such as the United Arab Emirates.

As a result, Japan's trade balance registered a deficit of 622.76 billion yen, turning negative from a 667.36 billion yen surplus a year ago to post red ink for the second consecutive month.

Ideas:

So despite challenges with the exports of car globally, merchandises and other products have rebounded which is good for the Japanese economy. 

And imports seem to have rebounded too, but there is question mark related to imports. Perhaps the volume of imports and value of imports should be separated from crude oil imports to get an accurate picture of imports into Japan.

If the increase in prices for crude oil prices is the only thing that is looked at its hard to see just what is the real picture of imports into Japan?

And as expected there is a trade deficit instead of a trade surplus. If perhaps crude oil is not included then maybe there might be a trade surplus or the deficit wouldn't be as significant as it is.

Whenever there is a trade deficit in reduced the current account of the Japanese government. 

Exports increase the current account and imports reduce the current account. But what is the real picture? Take crude oil out of the equation and the picture might look different.

Article:

A ministry official told reporters that Japanese automakers have been cutting production in response to parts shortages caused by factory shutdowns in Southeast Asian nations as coronavirus cases surged there as well as the prolonged worldwide chip crunch.

Earlier this month, Toyota Motor Corp. said it estimates its global output for November will fall by up to 150,000 units from its initial plan to produce about 1 million vehicles, while Honda Motor Co. has said it expects its October domestic production to drop by 30 percent from the previous plan.

Also citing the recent congestion of cargo ships at ports in California and elsewhere as a potential factor, the official said, "The supply side challenges, in a broad sense, might have affected car exports."

Ideas:

The chip shortage is not only effecting the eight Japanese car makers but also any company that is connected to the carmakers as they to might have to reduce or delay what they do in relation to what the carmakers do. 

So it has a domino effect throughout all companies related to the carmakers. As a result this might have a long term effect on the Japanese economy being able to move past the pandemic period. 

The Japanese car industry is big and just how much does it contribute to the overall Japanese economy will be seen in the coming months, or how much of an effect does the decrease in output have on the Japanese economy will be seen in the coming months if not now.

And then there is the cargo ship challenges in California. For example if the Japanese carmakers have recently shipped cars to the US, which goes through LA or Long Beach it could take months to unload.

It has been reported that there area still 100+  container ships sitting off the coast of California and some have been there since August.

So add in the supply shortages shortage and the logistics challenges the Japanese carmakers have some real challenges to overcome now and in the future.

Article:

Takeshi Minami, chief economist at the Norinchukin Research Institute, predicted that Japan's auto exports could remain sluggish "at least until the year's end" with semiconductors in short supply "for the time being."

However, Minami added, "The virus spread in Southeast Asia, driven by the (highly contagious Delta) variant, is calming down, so the auto parts procurement problem is expected to dissolve gradually" except for chips.

By country, exports to China, Japan's largest trading partner, rose 10.3 percent to 1.48 trillion yen for the 15th consecutive month of growth on brisk shipments of semiconductors and plastics. Imports from the neighboring country gained 23.8 percent to 1.77 trillion yen.

Ideas:

Japan's auto exports mostly likely will remain sluggish especially to the US because of the shipping challenges into the LA area.

And if the other supply challenges beside the chip challenges begin to work their way back to some kind of normalcy then perhaps the Japanese automakers can begin to get back to some kind of normalcy or a kind of a new normal despite the chip challenges.

Perhaps another question needs to be asked or considered. For example, if a company or companies such as car makers only rely on the same suppliers and the suppliers begin to have problems or challenges wouldn't it be wise to look for other suppliers in the future?

But in all fairness most likely this was situation that effected every chip maker globally? Or was it. For example are there or were there chips makers in other parts of the world beside Asia? How about the EU for example? Are there chip makers in the EU that might not have been effected? But maybe they because now there is the supplies needed to make the chips and where do the chip supplies come from?

Its good to see that exports to China continue to grow as will most likely continue to improve as both countries move past the pandemic. And is good to see import coming into Japan from China which indicates demand in Japan is continue to improve too.

Article:

In trade with the United States, Japanese exports marked the first decline in seven months, down 3.3 percent to 1.16 trillion yen, while imports grew 36.3 percent to 762.53 billion yen.

Across Asia including China, exports rose 21.3 percent to 4.09 trillion yen. Imports from the region grew 25.7 percent to 3.51 trillion yen.

Shipments to the European Union increased 12.1 percent to 621.26 billion yen, with imports from the bloc expanding 25.0 percent to 839.50 billion yen, led by pharmaceutical products including COVID-19 vaccines.

Ideas:

Perhaps the drop in exports to the US might just be related to the log jam off the coast of California as most likely the product is not really considered an export until it is inspected by US customs officials and cleared into the US.

Or it could just be a lull in demand related US company and consumer demand for the time being as demand will pickup again in the future.

The real picture might be to look at the inventories of companies that export to the US. Are they sitting on a lot of extra inventory waiting to be shipped to the US? And it could be nothing more than the estimates of demand for the future was not as accurate as it should have been and companies over-produced and now have extra good waiting for demand to increase.

And its good to see imports from the US and the EU into Japan increasing as it shows demand from companies and consumers increasing.

Article:

For the first half of fiscal 2021 from April, Japan's goods trade posted a deficit of 389.79 billion yen, the first red ink since the first half of fiscal 2020.

Exports rose 34.2 percent from a year earlier to 41.46 trillion yen, logging the fastest growth since the ministry began compiling data in January 1979, and imports were up 30.3 percent to 41.85 trillion yen. Both of them rose sharply, mainly in reaction to the previous year's 19.2 percent and 17.9 percent falls, respectively.

All figures were compiled on a customs-cleared basis.

Ideas:

The idea of trade deficits and trade surpluses need to be taken with a "grain of salt" meaning they should always be seen as something exactly positive or something exactly negative.

Sometimes the phrase "trade deficit" can be taken as a political statement. For example it gets too much in relation to China and the US.

Of course in the 80's it was the catch phrase related to the US and Japan. 

So in reality exports increased 34.2 percent, which of course is very good and then imports increased too 30.3. So 41.46 vs 41.85 respectively. 

But it must be remembered as has been mentioned and even in this article, the increase in crude oil prices which might have caused imports to increase to 41.85 trillion yen.

So what is the real value for imports if the increase in crude oil prices are not included?

So again the numbers need to be taken with a grain of salt as they might not show the real picture despite the well meaning of those who track and reports the numbers.

Ideas updated on Nov. 8, 2021.

Have a nice day and be safe!