Bank of Japan:

 https://the-japan-news.com/news/article/0007853775

Article:

TOKYO (Reuters) — The Bank of Japan cut its economic assessment for five of the country’s nine regions on Thursday as supply constraints disrupted factory output of cars and other products, clouding the outlook for the export-reliant economy.

In a sign of the broadening damage from the global chip and parts shortage, the central bank slashed its view on output for four regions including the Tokai central Japan area — home to auto giant Toyota Motor Corp.

“Output is stagnating due to shortages in auto parts,” the BOJ said in a quarterly report on regional economies.

Ideas:

Most likely supply constraint and other challenges related to supply chains are not going away for a while.

It needs to be remembered its not just the output of car but most likely all electronic companies might be challenged with supply shortages, rising shipping cost, shipping delays, and even increasing energy costs used for factories and other places.

For example it has been reported that up to 100 container ships are sitting in the Pacific Ocean off the LA port because of unloading problems.

As most of the ships going into LA and Long Beach make up about 40 percent of all imports into the US.

And most of the ships most likely carry products from Japan, China, South Korea, and all of the Southeast Asia countries, where Japanese companies produce a lot of products

Article:

Recent rises in energy prices are also adding pressure on manufacturers, though it will help consumer inflation accelerate towards the BOJ’s 2% target.

“Core consumer inflation is hovering around 0% but we expect it to turn slightly positive reflecting rising energy prices,” Kuroda told the meeting of regional branch managers, indicating that global inflationary pressure is spreading even to a country which has long struggled to shake off deflation.

“As the economy continues to improve and the impact of mobile phone fee charges dissipate, consumer inflation will gradually accelerate,” he said.

Ideas:

Energy prices should be kept separate from demand inflation, which is consumer spending, as a way to differentiate the differences in rising prices and costs.

But if energy prices at factories are rising, most likely companies will pass on the their rising costs to others along the chain and eventually to the final consumer.

Global inflationary pressure will appear in Japan, and it already has due to the increase in prices related to imports. Whether the products are final end products like food, or energy commodities, or supply resources need to make other products. 

The increase in the imports, is due to a multiple of factors including a weak exchange rate, which importer don't like meaning they have to pay more for the imported products.

Some of the price increases might be related to the significant increase in shipping costs globally. 

Importers of course will try to pass on the increased costs to whomever along the chain.

If prices related to food in supermarkets, in restaurants and other places are all increasing at the same time, it might not be a good idea just yet to say consumer inflation will accelerate. 

While there is going to be a slight bounce or increase due to pent up demand, it remains to be seen if consumer inflation can be sustained with all of the prices increase hitting at the same time.

Article:

Japan’s core consumer prices halted a 12-month run of decline in August, as energy costs offset the impact of cuts in mobile phone fees as well as weak consumption blamed on the coronavirus pandemic.

Kuroda maintained his optimistic view on the economy, saying it is likely to recover as the pandemic’s damage fades thanks to robust external demand and massive fiscal and monetary support.

Ideas:

Again energy prices should be kept separate from the core consumer inflation in order to see and differentiate the changes taking places in the Japanese economy.

If consumer spending is weak and it usually is it shouldn't be added together with energy prices. They should be separate areas to see what is really happening.

Yes, the Japanese economy, is some areas, might be ready to expand, but the Japanese economy has a long way to go to get back to the pre-pandemic level.

And yes massive fiscal and monetary support from the Bank of Japan needs to be continued well into next year as it might takes, for example the service sector, to recover which also includes tourism and hotels.

Article:

Inflationary pressure has emerged as a key risk for many countries across the globe, complicating the timing for when policymakers can reduce the massive monetary stimulus they deployed to combat the pandemic’s initial hit.

Japan has not been immune to rising raw material costs, with wholesale inflation hitting a near 13-year high of 5.5% in August. But companies have been slow in passing on the rising costs to households due to weak demand.

Ideas:

Some companies might continue to be slow due to consumer spending not being where it should be as consumers are not too happy about rising prices.

Increased raw material costs are a major challenge now for many companies in Japan. While some will pass on the costs to those next in the chain, many are reluctant to pass on the costs due to low consumer demand or they will try to pass some of the increased costs to next in line which might be regular consumers and  absorb the other costs which means the profit margins will become smaller.

And until Japan can get back to some kind of new normal which should include a full functioning services sector, the Bank of Japan should continue with whatever is needed to keep sectors and companies alive and not just zombies.

The problem is the international tourism industry which many companies thrived is far from anywhere returning. Until then, even with the domestic tourism industry back up and running or part of it, services is not going to be anywhere where it was before the pandemic.

When an industry loses up to a million customers a month, that will be hard to replace in the future.

And there is no guarantee that the pandemic is winding down. Just this week new reports of major virus problems in China, Russia, and even the UK with the new Delta + variant.

Have a nice day and be safe!