Japan Core CPI: Updated Jan. 11

 Source: https://mainichi.jp/english/articles/20211224/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices gained 0.5 percent in November from a year earlier, the highest increase since February 2020, pushed up by surging energy costs and a weak yen, government data showed Friday.

The core consumer price index, excluding volatile fresh food items, marked the third straight month of growth, according to the Ministry of Internal Affairs and Communications.

In February last year, the figure, a key gauge of inflation, increased 0.6 percent.

Much of the gain in the November core CPI came from higher energy and raw material costs on the back of the weak yen, though the Bank of Japan is still far from achieving its 2 percent inflation target.

Ideas:

Its no surpirse that core consumer prices are increasing. But a 0.5 percent increase should not be a worry for the Japanese economy, as inflation is not even near the 2.0 percent that the Bank of Japan has targeted.

But at the same time, households might be concerned that home energy prices and gasoline prices for their cars keep increasing.

The weak yen can be both a positive and a negative as it helps exporters and they can get more for what the export and sell globally. but hurts importers as the have to pay more for whatever is brought into Japan.

The Bank of Japan's target of 2.0 percent inflation should not come from increased energy costs or increased supply cost or from too much passing on of costs, but from consistent consmer demand in the Japanese economy.

Article:

Energy prices gained 15.6 percent, the largest increase since August 2008, the ministry said.

Kerosene prices jumped 36.2 percent from a year ago and gasoline surged 27.1 percent, reflecting higher crude oil prices. Electricity bills, which track crude oil prices with a lag, rose 10.7 percent.

Sharply lower mobile phone fees, down 53.6 percent in the reporting month, introduced earlier this year amid government pressure to ease the burden on consumers, were a major drag, helping limit the rise in the headline inflation figure.

"It's easy for energy and food companies to pass on higher costs quickly to consumers," said Toru Suehiro, a senior economist at Daiwa Securities Co. "Beyond such items, price hikes have not spread, especially in the services sector hit by the pandemic."

Ideas:

Energy prices seem to be getting out of control. Perhaps its time for the Japanese government to put some kind of price controls into place and its time to begin to consider price controls if energy prices start to get too high for anyone in the economy and society.

A price control is supposed to keep prices from going any higher as a way to help the economy and society. 

At the same time some would say its interfering in the market economy instead of letting the marke be as it is.Some would say market interference is too distruptive to the normal and regular market forces.

And the same can be said for potential emergency measures if they are implemented again in the Tokyo area, as maybe being too distruptive to the Japanese economy. 

As much of the popluation is now vaccinated and boosters are beginning, maybe the Japanese economy doesn't need any more emergenecy measures.

But beyond food and energy companies it will be interesting as to what other companies try to pass on their costs to consumers.

Article:

Japan has seen prices rising only moderately compared with other nations such as the United States, which marked the sharpest gain in around four decades of 6.8 percent in November.

Despite upward pressure from commodity prices, Japan's inflation is expected to remain low, giving the BOJ reason to maintain its easy money policies and diverge from its U.S. and European peers, which are moving toward dialing back crisis-mode stimulus.

A ministry official said prices are "rising steadily" in Japan, where the BOJ projects the core CPI to rise 0.9 percent in fiscal 2022 starting in April.

Ideas:

Most central banks want to keep inflation in the 2.0 to 4.0 range. Most feel that is a manageable level and the economy is running at a good level of activity.

Below 2.0 percent they might think an economy is not running as good as it can,meaning consumer demand is below where it should be. And above 4.0 percent some might think an economy is beginning to get into the overheated range.

But as an economy is very complex there are many layers in the economy. And as been seen in the Japanese economy, perhaps reaching the BOJ's target of 2.0 percent is not feasible or even needed, for the most part, for the economy to be running at a good level.

That is Japan's economy has been stuck at an inflation rate well below the 2.0 level that the BOJ wants to see. While it might be good to try and get it up to that level, but some might say, why bother, not counting the pandemic, the Japanese economy has been moving along just fine the past 2 or 3 decades.

There are some major flaws of course in the Japanease economy, and for the most part, they are out of the control of the BOJ. The big one is of course wages and trying to get companies to increase wages. The BOJ and even the Japanese government can only do so much.

The other major flaw, compared to other countries is that maybe consumer demand or consumer spending is not where it should be or maybe is not at its potential.

The Bank of Japan is right in keeping its easy money policies now as the virus situation doesn't look like its going away any time soon and there are still many companies and families that are not doing so well.

Article:

"The worry is that such items as energy and food are closer to people's daily lives so higher prices can hurt sentiment among consumers. They may start feeling that it's bad inflation accelerated by yen weakness at a time when economic conditions are not good," Suehiro added.

Japan's COVID-19 state of emergency was lifted in October, allowing economic activity to pick up. Accommodation fees continued to surge in November, up 57.6 percent from a year ago when the government's subsidy program to rejuvenate regional tourism in the nation led to sharp discounts.

Excluding both fresh food and energy items, the so-called core-core CPI fell 0.6 percent, down for the eighth straight month.

Ideas:

Energy and food prices are two items that are very important ot the daily lives of people. As they have to heat their homes, they have to use electricity in their homes, they have to go to the supermarkets, and they have to drive their cars and use gasoline.

As such these are items that most likely they have to use on a daily basis. Yes of course they might try to conserve on energy and they might try to find subsitutes for some food products, but over time they have no choice in these basic daily items.

An economy, again, is a very complex organism. Yes there can be the illusion that the economy is moving and is recovering and that there is more economic activities taking place. 

But at the same time, such as the US, despite a record number of jobs in 2021, despite the pandemic, inflation was at a four decade high. 

So there can be some parts of an economy that appear to be doing very good and some parts of an economy that aren't doing so good.

So in Japan the economy might appear to be recovering but maybe because of the weak yen some food prices and most of the energy commodities are beginning to get too high for the average consumer.

And then as has been reported some some media, there is the potential challenge of nationalistic hording of some energy commmodities which in effect could result in a energy coommodity price war or an energy commodity shortage, even more than now.

As Japan is a resouce weak country and has to import much of what it needs its in a vulnerable position.

But it does have some political and economic power being the 3rd largest economy in the world and in a somewhat strong alliance with the US, and it could be important if the energy commodity situation gets worse in 2022.

Have a nice day and be safe!