Japan's Core Consumer Prices: Updated Dec. 11

 https://mainichi.jp/english/articles/20211119/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices gained 0.1 percent in October from a year earlier, reflecting upward pressure from higher fuel costs that threaten to cool consumer sentiment as the economy emerges from the COVID-19 doldrums, government data showed Friday.

The core consumer price index, excluding volatile fresh food items, has been in a tug of war between rising commodities prices and sharply lower mobile phone charges, according to the Ministry of Internal Affairs and Communications data.

Higher fuel costs heading into winter when energy demand increases are feared to deal a blow to Japanese consumers as the country sees a pickup in economic activity with the whole nation free of COVID-19 states of emergency.

Ideas:

Prices will most likely continue to fluctuate as an economy is very complex and there are always positives and negatives in an economy meaning prices are always fluctuating related to changes in producer prices, changes in energy prices, and changes in overall supply and demand.

Consumer spending in December and the New Year holiday might see a increase but after that consumer spending might slow down a little.

Part of the reason might be consumers might have spent a lot during the December holiday period and the one week new year period but after that maybe feel they need to spend a little less.

And then of course there is the higher fuel costs; including higher gas prices, higher home electricity and oil prices, as consumers might feel they need to cutback on spending as the higher energy prices are now crowding out other spending in the economy, as their is now less disposable income available.

Article:

Japan's high dependence on energy imports makes the resource-scarce nation susceptible to swings in commodities prices and a weaker yen also inflates import costs.

Gasoline prices rose at the sharpest pace in over 13 years, up 21.4 percent, tracking higher crude oil prices. Kerosene jumped 25.9 percent while city gas prices turned positive for the first time since August 2019.

A record 53.6 percent fall in mobile communications fees continued to weigh on the core CPI, masking, economists say, the full impact of rising inflationary pressure in Japan.

Ideas:

There are always going to be some positives and negatives in a market economy. And as an economy is very complex, the positives and negatives don't affect every company or every consumer the same.

For example even though a weaker yen is a positive for Japan's exporters its a negative for Japan's importers as now importers have to pay more for what they bring into Japan.

But some article claim it might be more of a positive and currently exporting is a very needed part of the Japanese economy, since there are many other parts of the economy that are not doing so good.

Even though Japan, and many other countries are beginning to use their energy reserves to try and bring gas and oil prices down, it can only be a temporary solution as countries may only had a 100 or 200 day at most reserve supply.

So they have to continue to import gas and oil at the higher prices that OPEC expects which means the oil reserve strategy, at best, can only help the economy so much.

Perhaps the Japanese government should consider the idea of gas and energy price controls, meaning limiting the price and not let it get any higher until oil and gas supplies can level off. 

But then that is interfering in the market, even more than the energy reserve strategy. Some would say let the market be natural and prices will eventually level off and get back to normal.

While always a good strategy the problem is how many families or businesses have to suffer with the higher prices until the supply and demand get back to some kind of normal?

As mobile communication fees continue to decrease companies such as Docomo and others are not going to let their profit margins decrease. They most likely will increase the prices of other products and services as needed to maintain their profit margins.

Article:

Major Japanese carriers decided to offer cheaper plans in the face of government pressure to ease the burden on consumers.

Accommodation fees gained 59.1 percent from a year earlier, when the government's subsidy program to shore up regional tourism in Japan sent prices sharply lower.

The rise in the headline CPI is still modest compared with the United States and some European nations where inflation is rapidly accelerating.

Excluding both fresh food and energy items, the so-called core-core CPI dropped 0.7 percent, down for the seventh straight month.

Ideas:

The increase in accommodation prices such as for hotels and other places most likely are not going to deter tourists or travelers in the near future and the December holiday period and the week long New Year period people will want to get out and about and travel as much as they can.

In the winter months of January and February, after the week long holiday period might see some lull or pause in travelers but as spring begins to approach and if the government starts the Go To Travel program again, there might be a surge in travelers again.

The increase in price at hotels and other places might be nothing more than hotels trying to make up for lost revenue and sales during the pandemic and the increase in demand as consumers want to get back to some kind of traveling.

Inflation has always been less in Japan than other countries as Japan producers and other companies are very reluctant to pass on their supply costs to the next in the supply chain and then to the final customer/consumer as consumers in Japan are very elastic meaning they are very sensitive to price increases. 

And of course consume spending has never been where it should be in Japan. Part of the problem is the problem that some companies might have very little room to increase salaries and their profit margins are always being challenged by increases in supply costs which are crowding out other areas such as increases in investments and or increases in salaries.

Have a nice day and be safe!