Japan's Job Availability:

Article Source:  https://mainichi.jp/english/articles/20220201/p2g/00m/0bu/036000c

Article:

TOKYO (Kyodo) -- Japan's job availability ratio fell for the third straight year in 2021 as companies continued to feel the impact of the coronavirus pandemic and offered fewer job openings, government data showed Tuesday.

The ratio stood at 1.13, the Ministry of Health, Labor and Welfare said. While that still meant 113 openings for every 100 job seekers, it was down 0.05 point from the previous year, following a 0.42 point plunge in 2020.

The number of job seekers grew 6.6 percent last year to 1.9 million, including full-time homemakers trying to make up for falling family incomes due to the economic fallout from the pandemic. Job offers, meanwhile, only increased 1.6 percent to 2.2 million.

Ideas:

The number of jobs available in Japan is still a lot at 113 jobs for every 100 job seekers. The real question is what kind of jobs are really available. Are they jobs with good salaries and benefits or are they temporary or contract jobs that might not provide the benefits job seekers are looking for.

Its significant that homemakers are trying to enter the workforce because of falling family incomes. So what is the reason for falling family incomes. Is it because of inflation related to an increase in food and supermarket prices. Is it becasue of home energy prices have increased. Is it because of gasoline prices have been increasing. Or is it because of layoffs in some industries that are effecting famalies.

So 1.9 million job seekers in Japan. What is the reason for so many job seekers. Again is it because of layoffs related to the pandemic. Is it because some or many people have planned to change jobs all along and have just been waiting for the right time to change jobs. 

Job offers might be a 2.2 million but again what kinds of jobs are being offered at this time. Are good paying jobs with good benefits. And are they the kinds of jobs people want or need. The days of companies offering just any jobs is gone in the 21st century as the younger generations are not willing to work like the grandparents or even their parents.

So companies need to be aware of what the younger generations are looking for in jobs. Such as the idea they might not want to work from 9 to 9 everynight like the older generations did. They might not want to go out to drinking parties or dinners like the older generations did. And they might not want to wait until they are 40 or older to get promotions in the company. So companies need to be aware of what the younger generations want and need to get the best talent out there.

And then there is now the idea that maybe some workers don't want or aren't willing to sit at a desk from 9 to 6 everyday and want to work from home too.

Article:

The labor market was swayed by the pandemic in 2021 as surging infections prompted the government to repeatedly put Tokyo and other areas under states of emergency that requested residents to refrain from non-essential outings and eateries to close earlier.

The country's jobless rate in 2021 stood at 2.8 percent, unchanged from the previous year but worse than the 2.4 percent rate in the pre-pandemic year of 2019, according to the Ministry of Internal Affairs and Communications.

The average number of unemployed people climbed 20,000 from a year earlier to 1.9 million, increasing for the second straight year.

Ideas:

The Japan labor market most likely was not hit as hard as maybe other economies were because of the labor law situations that make it hard to layoff workers. For example one strategy that companies have used is to transfer workers from one area of the company to another area of a company.

Another strategy that companies use is to lend out workers to other companies that need workers in some areas. This seems to have been a common practice among Japanese companies. Of course a question might be is just how qualified are some workers to move to another company for a short time.

The jobless rate in any country is never going to be 0 percent as there is always going to be some kind of unemployment in every society. Sometimes its related to a job structural problem, meaning the job skills of some workers don't fit the jobs available. Sometimes its related ot some changing jobs and it takes time to find an new job. And unfortunately it relates to some who just don't want to work and have given up finding a job. 

But most labor measurements don't include those who have lost hope and given up in the unemployment statistics. Only those who are presistent in trying to find a job are included.

So the the jobless rate in Japan could be much higher if everyone was include.

Article:

Nonregular workers, many of whom were employed in the restaurant industry, a sector hit hard by the pandemic, fell 260,000 to 20.6 million, down for the second consecutive year.

Workers in the accommodation and restaurant sector totaled 3.7 million, the smallest number since comparable data became available in 2002.

"With on-and-off restrictions, the eating out sector was unable to fully recover its workforce," said Naoko Ogata, a senior economist at the Japan Research Institute.

Ideas:

Nonregular workers, unfortunately, are becoming more common in Japan as companies turn more western and try to reduce costs and give little or no benefits to nonregular workers.

Its an unfortunate situation that suggest that up to 30 percent of the Japanese workforce is made up of nonregular workers.

Its a very unfortunate situation that the services sector, where most of the nonregular workers work in, are the ones who feel the pandemic situation the most. 

They should be the ones that should be given the most support from the Japanese government along with companies and businesses they work for to keep in with the companies, as much as possible. 

They most likely don't have the same kind of salaries as the big company employees have a don't have the same benefits and most likely are living paycheck to paycheck or were before the were laidoff because of the pandemic

Hopefully as the pandemic begins to slow down the hotels, restaurants, and other places will bring back their nonregular workers if they want to return to their former jobs.

Article:

In December alone, the job-to-applicant ratio improved to 1.16 from the previous month's 1.15. The unemployment rate fell to 2.7 percent from 2.8 percent in November after the latest state of emergency was fully lifted in October.

The lodging and eatery sector showed some recovery.

Although the number of workers in the sector dropped 30,000 from a year before, the pace of decline slowed from 190,000 and 440,000 drops in November and October, respectively.

Ideas:

Any kind of improvement in service sector jobs is good but it might take most of the spring or even into the summer to see significant improvements in the services sector.

Restaurants might come back faster than the hotel industry as people get out and about more and more. 

But the hotel industry might take a longer time to recover as the Go to Travel program has not restarted yet. And then there is the idea of international tourism which hotel took a big hit on as the thousands of Chinese which the hotel sector became heavily reliant on are not going to come back quickly. 

International tourists of course are ready and willing to travel but countries have to be willing to open their borders. Many in the EU, before the Ukraine crisis were beginning to open up.

But Japan hasn't opened up to international tourism just yet, and China for example might not be allowing is citizens to travel just yet, except for maybe to the US and EU for business travel.

Article:

The outlook remains uncertain, however, as the country has been facing a resurgence of coronavirus cases, with most areas of the country again under a quasi-state of emergency mainly to prevent the spread of the virus at eateries.

With the fresh restrictions in place, "more people are expected to refrain from going out and the recovery (of the labor market) will slow," Ogata said.

Ideas:

The virus situation will probably on and off again for some time which means the Japanese economy is not going to get back to any kind of pre-pandemic level just yet.

While the omicron virus might not be as severe for some people, unfortunately for others they aren't so luckly with severe cases and even deaths in some cases.

So maybe its a little too early to call the omicron situation just another flu virus just yet.

And most likely the present omicron situation is going to force some companies to refrain from hiring like the would for the start of the fiscal year in April 2022.

But over time, if the omicron situation does begin to receded we could see a surge in hiring and a surge in more people out and about, as people might feel they have had enough and want to just get back to some kind of normal especially as the spring months are approaching.

Especially as more and more people in Japan get the booster shots and feel good about going out.

Have a nice day and be safe!

Japan Industrial Output:

 Article Source:  https://mainichi.jp/english/articles/20220131/p2g/00m/0bu/028000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in 2021 grew 5.8 percent from a year earlier but remained below its precoronavirus pandemic level amid a resurgence of infections and a global semiconductor shortage, government data showed Monday.

The seasonally adjusted index of output at factories and mines in 2021 stood at 95.9 against the 2015 base of 100, with the fastest increase since comparable data became available in 2014, following the worst decline of 10.4 percent in 2020, the Ministry of Economy, Trade and Industry said in a preliminary report.

Although the annual figure logged the first rise in three years since 1.1 percent growth in 2018, the latest production level was far lower than the reading of 101.1 in 2019, before the pandemic began to weigh on the domestic and global economies.

Ideas:

The Japanease economy might not get back to the pre-pandemic level for a while as there are holes in the Japanese and global economy.

While production and manufacturing seem to be moving in the right direction despite the global chip shortage and the global energy situation, the services side is far from healthy. It might take more than a year for it to get back to some kind of normal or even a new normal.

It will be hard to replace the thousands of Chinese tourists or even the thousand of foreign tourists from anywhere else in the near future.

And now with the Ukraine crisis the global economy is going to be even more challenged in the near future.

Article:

Japan's output recovery was slowed by a global semiconductor shortage and a suspension of parts production in Southeast Asia due to a surge in COVID-19 cases that dealt a blow to the auto industry in the world's third-largest economy, according to a ministry official.

The annual index of industrial shipments rose 4.8 percent to 93.9, while that of inventories was up 5.5 percent at 98.3.

In December alone, the index fell 1.0 percent to 96.5 from the previous month for the first decline in three months, led by weak output of general-purpose and business-oriented machinery, such as water tube boilers and internal combustion engines, as well as production machinery including chip-making equipment.

Ideas:

Japan's output is always going to be cycical and not grow in a linear fashion as there are always supply challenges, demand challenges, seasonal challenges, add in any external global challenge and there will always be challenges for output to grow in a linear path.

Companies need to recgonize that there are going to be output challenges and prepare accordingly with making sure there is room for flexibility in their production schedules and in their supply and logistics. 

For example, while it worked in the past Toyota's lean manufacturing might not be the best approach in the 21st century. Or perhaps Toyota needs to decide what are the most important parts that we need to keep good supply in case of supply challenges and what can we only keep a minimal supply in our plants.

Inventories are always an interesing measurement. If inventories start to get too low, it could mean several things. It might mean that demand for a product is/was higher than expected and or demand projections were off. 

If there is trend of a surplus of inventories it could mean demand slowing and companies need to take appropriate actions to make sure demand doesn't continue to buildup in its warehouses.

Article:

The December index followed a downwardly revised 7.0 percent increase in November.

The official said the spread of the highly contagious Omicron variant of the coronavirus that has led to a resurgence of infections in Japan likely had no impact on output in the reporting month.

Based on manufacturers polled in a survey, the ministry said it expects output to advance 5.2 percent in January and climb 2.2 percent in February. It retained its assessment of the data, saying output at factories and mines "shows picking-up movement."

Ideas:

As this is now the 5th or 6th wave of the pandemic, maybe many companies have learned how to prevent or reduce the impact on the pandemic on its employees.

And at the same time maybe everyone might be taking the omicron virus situation a littel less serious and many or most have been vacinnated if not the booster shot.

So while there are infections continuing there might be the mindset of getting back to some kind of normal now if that hasn't happened yet. 

But even if workers try to get back to some kind of normal, with infections occuring, how long is it going to take for the services sector to get back to some kind of normal.

But some might say, if you go out and walk around the subway or train stations there are people everywhere, and it looks like things have returned to normal. 

That mgiht be so, but service type business were dug into a deep hole and its going to take them a long time to get back any kind fo normal.

So while manufacturing output might be getting back to normal or some kind of new normal, the services side of the economy might take a very long time to dig out of its two year deficit.

Article:

But Takeshi Minami, chief economist at the Norinchukin Research Institute, was cautious about the outlook, referring to the recent sluggish recovery of the car industry as the spread of the variant has forced some domestic companies to suspend production.

"After the supply side issues around September and October eased, the auto industry had been rebounding, but December's (1.5 percent) increase in output was small and its level was still off from the recent peak in March," said Minami, adding that car production will likely remain at a "standstill" for the time being.

In December, the index of industrial shipments fell 0.1 percent to 95.2, while that of inventories increased 0.5 percent to 101.2, according to the ministry.

Ideas:

Car production might be somewhat sugglish or at a standstill that doesn't mean all car companies or all plants in every country where Japanese car companies produce are the same.

Some might be produicing more than others and maybe some car production plants just might be producing normally.

And there is still the chip challenge that car companies and any company that produces electronic products are having to deal with at this time.

There is always the idea that sales of cars are not linear meaning there are going to be months or season of good sales and months and seasons of less than good. 

Buying a car is a major purchase decision that consumers might do only once every five years and maybe only at certain times of the year. Of course there are enough consumers or car purchasers out there that car companies can reasonablly expect to see a constant sales stream throughout the year. Some a little more one month than another month.

Have a nice day and be safe!

IMF and Japan Economy:

 Article Source: https://mainichi.jp/english/articles/20220128/p2g/00m/0bu/022000c

Article:

WASHINGTON (Kyodo) -- The International Monetary Fund said Thursday the coronavirus pandemic is unlikely to have "significant scarring effects" on Japan due to substantial fiscal and monetary support, but the world's third-largest economy needs to come up with post-pandemic policies to ensure sustainable growth as its population shrinks.

The IMF also said in an assessment of Japan's economic developments and policies that there is still "room" to raise revenues such as through consumption tax rate hikes, with the country's tax revenues as a percentage of gross domestic product relatively low among the Group of Seven industrialized nations.

The Washington-based institution holds regular consultations with member countries, usually annually. The pandemic, however, has disrupted the schedule, making the latest report on Japan the first since February 2020.

Ideas:

Most likely the Japanese economy is going to come out of the virus situation without a lot of scarring effects in most industries. But that can't be said for the services sector and especially the businesses that relied heavily on domestic or internatinal toursim, or even JAL an ANA which relied a lot on its overseas flights.

Japan has done a lot of fiscal and monetary support but there are always some who would say its not enough due to fact it might have never reached certain businsses or familes who might have been in the shadows or in the blind spots related to aid and subisidies.

Maybe the IMF doesn't remember or know just what happened in 2014 and 2019 when the Japanese government increased the sales tax rate. When the tax rate went from 5 to 8 percent in 2014 there was sigificant increase in consumer spending in the months before the April 2014 tax increase and then the months after the tax increase consumer spending decreased significantly as consumers either already bought what they wanted or didn't want to buy. 

The same thing happened in 2019, but it seemed on a larger scale.Being in Yokohama in September of 2019 it seemed like it was feeding frenzy meaning there were sales everywhere trying to get people to buy before the Oct. 1 sales tax increase from 8 to 10 percent and then after Oct. 1 and many months after consumer spending again dropped significantly. 

What this shows is that the Japanese consumer is very sensitive to price changes and the sales tax is essentially a price increase for consumers.

While the Japanese government might be justified to increase the sales tax again in the future, they need to be aware of the overal effect on the Japanese consumer. Yes they had different levels of the sales tax on different kinds of products but it was a very confusing situation for the Japanese public at that time.

Article:

In its preliminary findings following the consultations, the IMF estimated that Japan's growth will accelerate to 3.3 percent in 2022 following a 1.6 percent rise in 2021, on the back of continued strong fiscal support, a high COVID-19 vaccination rate and the easing of pandemic-related global supply constraints. The economy suffered a 4.5 percent contraction in 2020.

While the current surge of the highly transmissible Omicron variant of the coronavirus in Japan could slow growth momentum in the first quarter of 2022, a "strong rebound" is expected in the second quarter as the wave dissipates, the IMF said.

But it also warned of the "unusual uncertainty around the pandemic," touching on a possible delay to the recovery of services consumption if strict containment measures become necessary as a result of Omicron cases overwhelming the health system.

Ideas:

Any kind of economic growth has to be tempered with the idea the growth is being measured against the negative growth from the previous year so in real economic terms it might not be that much, but better of course than the year before.

Even as the Japanese economy does get to back to some solid growth not all sectors in the Japanese economy are going to growth at the same rate, just like before the pandemic and in a market economy there are always going to some sectors that grow more than other sectors.

Exports and manufacturing might be signficant bright spots for the Japanese economy but the services sectors especially related to tourism might take a long time to get back to any kind of pre-pandemic level, especially the international tourism sector, with the thousands of missing Chinese tourists who have yet to come and as the Japanese government has not yet allowed tourists to enter the country.

The first quarter of 2022 in Japan and most countries might not be a robust as expected or needed but by the end of the second quarter the Japanese economy might begin to takeoff and see some signs of reaching the pre-pandemic level in most sectors except the tourism sector.

But then again, as has been suggested there could be some new strains that come along and again disrupt or slow down the growth of the Japanese economy.

Article:

Overall, the "scarring effects" from the health crisis -- meaning the extent to which growth will return to its pre-pandemic level -- will be limited in Japan due to the significant support provided to companies and households, Ranil Salgado, assistant director of the IMF's Asia and Pacific Department who led the IMF's mission to Japan, said in an online press conference.

"As we exit the pandemic, households will have substantial savings that have been built up during the pandemic, which is often different from what you see in other crises...Firms have been able to retain workers," he added.

A fiscal stimulus package announced by the Japanese government in November could have been "better targeted," such as by lowering the income threshold for cash transfers to child-rearing households, but it will provide "needed support," the IMF said.

Ideas:

The scarring effects might not seem apparent or visible in the overall economy but for sure there have been many layoffs and businesses that have closed and or reduced their operations due the pandemic.

Yes, some households might have substantial savings built up but that doesn't mean all households in Japan have the same amount of savings. But Japanese households or consumers are not as spend crazy as for example the US consumer, so there might not be a wave of significant spending in Japan after the omicron virus passes. 

Consumer spending has always been a major challenge for the Bank of Japan and it will probably continue to be a challenge. And now if you add in the prices increases in the supermarkets, the gas stations, and increases in home energy prices, those areas could be constraints on some to get out and spend in the coming months.

Firms might have been able to retain workers but the lastest reports suggest there is movement in the Japanese labor market as some workers are quitting their jobs or have moved on to other jobs as they were just waiting for the pandemic to subside before they changed jobs.

Yes the November stimulus for child rearing families could have been structured better to provide better support for more low income families and even single mother families who usually have lower income than the traditional family.

Article:

The exceptional fiscal support and the sharp output drop during the pandemic, however, have raised Japan's debt-to-GDP ratio from 236 percent in 2019 to 259 percent in 2021.

While debt rollover and issuance risks are "contained" in the near term, helped by a large domestic savings base and other factors, debt sustainability risks will increase as demographic trends weigh in the medium and long terms, with health care and long-term care spending expected to continue rising, the IMF said.

Over the longer term, a possible shrinking of the labor force and low productivity growth are two of the main challenges faced by the Japanese economy, Salgado said in a written interview with Kyodo News.

Ideas:

Yes there was exceptional fiscal support, but again there might have been some blind spots where some businesses and some households were unable to get any kind of support.

And yes the sharp drop in output and the significant increase in government spending no doubt increased the debt to GDP ratio to most likely the highest in the world.

The high debt to GDP ratio has been a part of Japan's economic situation for decades as Japan has always tried to spend its way to economic growth, and maybe more than any other economy. 

For example roads to nowwhere, bridges that are not important and so on as construction projects have always been a favorite of the Japanease government as a way to grow the economy.

Maybe the US, a joke, should take a lesson on how Japan continues to improve its infrastrucure even if not needed.

The ageing of the Japanese society is most likely going to be a challenge in the future. But it doesn't have to be that way. Most likely there are many in the upper age groups willing and able to continue working instead of companies having some kind of set age that they must leave the company and maybe even not be active even though they want to do it.

For example one company, Dentsu has a program that allows workers to move from working directly with or for Dentsu and Dentsu helps them setup their own business and they can continue to work and contribute to society and economy without just being thrown out of the economy.

One area of low productivity that seems to be improving somewhat now is the idea of working from home and not having to stay an office from 9 to 6 or later. What some articles suggest is that workers feel they are more productive when they are not required to sit at their desks all day long and can work some days at home and some days in the office.

Article:

To raise revenues, the IMF laid out options to explore including raising the current 10 percent consumption tax rate, without specifying an exact level, and strengthening property taxation through the removal of preferential treatment of residential land.

Meanwhile, medium-term inflation is projected to remain well below the Bank of Japan's 2 percent target.

"In this regard, we strongly support the Bank of Japan's commitment to accommodative monetary policy until inflation is durably above target," Salgado said.

Ideas:

The Japanese government, at the moment, might not be too eager to raise the sales tax above the 10 percent level knowing full well how sensitive Japanese consumers are to prices increases, which is what the Japanese consumer will see and fell, an increase in prices.

The Japanease government has to be concerned with the continued increase of the aged population who are on fixed incomes and how the sales tax increase might effect them.

Not to mention the continued increase in supermarket prices and home energy costs which might be effecting their limited budgets at the same time.

The Bank of Japan has been trying to reach the elusive 2 percent target for many years without much success. Maybe the Bank of Japan should forget about its 2 percen target until the Japanese economy is fully out of the pandemic situation and its fully back to the pre-pandemic level and then being to focus on the 2 percent target. 

But for now the Bank of Japan should continue to support businesses and households until the pandemic is over with and even continue to support whomever as all in the economy are not going to come back as quickly as others. 

Some parts of the Japanese economy are going to bounce back quickly but some parts are going to take some time even when other parts reach the pre-pandemic level quicker.

Article:

While monetary tightening is expected or already under way in some advanced economies amid higher inflation, the IMF official said interest rate differentials could weaken the yen further.

A weaker yen would be a boon for export-oriented firms, as their overseas profits would gain a boost when repatriated.

At the same time, a sharp tightening of global financial conditions could lead to "heightened risk aversion" and trigger an appreciation of the yen, which is perceived as a safe-haven, the official added.

Ideas:

There are always going to be positives and negatives in a market economy. A weak yen might be a boon for exporters but its a negative for importers as now they have to pay more for what they bring into Japan.

And now even more with the global increase in energy prices its more of a challenge for Japanese importers, especially energy importers.

Exports has always been a stong economic growth driver so most likely there are those in the Bank of Japan and the Japanese government see the positives of the weak yen but at the same time coming up with measures to help energy importers who have the challenges of a weak yen and at the same time the continued increase of global energy prices.

And now as the Ukraine situation continues to get worse the gas and oil situation related to Russia might increase energy prices even higher.

The Japanese government just stated they are going to increase the subsidies that they give t energy importers as an incentive not to pass on their increase costs to the next in the supply chain and hopefully not reach the gasoline stations and the final consumer in the chain.

The Ukraine situation might bring challenges to all countries if the SWIFT situation begins to affect not only Russia but many other countries as collateral damage.

Have a nice day and be safe!

Bank Of Japan And Inflation: Updated Feb. 14

 Article Source:  https://mainichi.jp/english/articles/20220126/p2g/00m/0bu/034000c

Article:

TOKYO (Kyodo) -- Bank of Japan board members said core consumer inflation will likely move toward the bank's target of 2 percent and believe the trend can continue if wages grow, a summary of opinions at a January monetary policy meeting showed Wednesday.

Still, the goal is to ensure core consumer prices rise above 2 percent in a "stable" manner and the current aggressive monetary easing should be maintained, some members said, shooting down expectations of a policy change in line with the United States and Europe that are moving toward policy normalization to counter accelerating inflation.

In an economic outlook report released after the Jan. 17-18 policy meeting, the BOJ lifted the outlook for the core consumer price index, which excludes volatile fresh food items, for fiscal 2022 from April to a 1.1 percent gain from its previous forecast of 0.9 percent. It changed its view on risks to prices for the first time since 2014, saying that they are "generally balanced," compared with its previous assessment that risks are "skewed to the downside."

Ideas:

Core consumer inflation in Japan seems to always be a challenge as consumer spending is also a challenge in Japan meaning most likely consumer spending is never at its potential to the amount of savings households have.

The key phrase or word is in a stable manner most likely meaning that consumer inflation increases based on an increase in consumer demand and not a large increase in wholesale prices that are being passed on to consumers or the next in the supply chain.

Yes Japan should not follow what the US and the EU are doing as each country and area is unique and has its own specific set of circumstances and what the US does for example might not work in Japan.

It might not be a good idea to increase interest rates at this time as many businesses and households might still be depending on the easy money rates to survive. An increase in the key rate just might increase the burdens on those who have loans now and discourage those who need loans in the future.

The idea that the CPI is generally balanced might mean prices are increasing but there is balance in the economy in terms of the passin on of cost are spread out evenly and not just one sector or one are and consumers a businesses are seeing price increases evenly throughout the economy.

Article:

"From April 2022 onward, the year-on-year rate of change in the CPI may momentarily rise to a level close to 2 percent if the effects of the reduction in mobile phone charges dissipate and other factors simultaneously contribute to pushing up the CPI," one member said.

Another said core CPI is expected to rise to around 1.5 percent temporarily in the first half of 2022.

"That said, whether the rate thereafter will come close to the price stability target of 2 percent and stay at that level with the inflation momentum being maintained depends on the strength in demand, suggested by developments in wage inflation and medium- to long-term inflation expectations," the member said.

Japan's core CPI rose 0.5 percent in December from a year earlier as higher fuel costs more than offset sharply lower mobile data fees.

Ideas:

Most likely by April 2022 most mobile phone subscribers might have gotten new subscriptions and or the novelty of the new rates have worn off of consumers and they aren't rushing to get  the lower rates.

And at the same time, many companies are passing on their increased costs to consumers or the next in line which is going to increase the CPI over time.

The idea or strength of demand is always a challenge in Japan and consumer spending. Japanease households, as has been reported are sitting on a record level of savings or some households. But maybe there is still a large part of the Japanease population that is still recovering from the pandemic.

It remains to be seen just what companies are going to do in April 2022 with regards to wages.While Prime Minister wants to see a 3+ percent increase in wages, just how many companies are going to do it remains to be seen.

The idea is of course as workers/consumers get wage increases they will begin feel better about their wages and maybe save some of it and then spend some of it.

This can have a layered multiplier effect meaning as workers/consumers get wage increases they will begin to use the increased disposable income in the economy meaning of coures not only do they benefit from the wage increase but many areas of the economy will also benefit as more consumers/workers use it spend in the economy. 

But there is still the possibility of higher fuels costs both for households and businesses being a constraint on consumer spending and a constraint on what businesses might want to do in the future.

Article:

BOJ Governor Haruhiko Kuroda has said the recent rise in core CPI is mainly due to higher commodity prices, casting doubt on its sustainability without stronger wage growth. He told a post-meeting press conference the bank was not discussing raising interest rates or changing the current accommodative policy.

"Since it will still take time to achieve the price stability target of 2 percent in a stable manner, there has been no change in the bank's basic thinking that it should continue with the current powerful monetary easing. It is important for the bank to firmly maintain its policy stance and clearly communicate it to the public," one member said.

Annual wage negotiations between management and labor unions will shift into full gear toward March amid calls by Prime Minister Fumio Kishida for aggressive pay hikes by companies that have recovered from the COVID-19 pandemic. Higher wage growth is seen as important for consumers to manage the impact of more pricey goods and services.

Ideas:

Commodity prices affect not only businesses but also households. Consumers or households might see a double affect of commodity prices. They might see an increase in home energy prices and gasoline prices and then they might see an increase in prices in other areas as businesses attempt to pass their costs to the next on the supply chain meaning maybe consumers.

Which of course means less disposable income or less extra income to use and spend in the economy, which of course means a wage increase is even more important for the Japanese economy to grow. 

Here is the key phrase; "since it will take time" seems to be the Bank of Japan's main strategy phrase as they have been attempting since 2014, or around there to reach the 2.0 percent level of inflation.

Wage hikes might be very important for households and consumers but how many companies are going to do it and how many companies are actually recovered from the pandemic. For example how many if any service type businesses have recovered to the point of being able to even think about wage increases.

For example has JAL and ANA recovered enough to even think about wage increases or are they still in some kind of survival mode and international travel has not resumed enough to the point of moving past the breakeven point between profitability and losses. 

And can they earn a profit in 2022 on just domestic travel especially if the are not flying at the capacity needed to breakeven or move into the profitabilty zone.

Consumers and houesholds, if possible, will seek out subsitutes or alternatives if prices begin to get too high. As household energy prices increase, and gasoline prices continue to increase, along with supermarket prices, consumer spending might not be at the level that the Bank of Japan wants or needs for the economy.

Article:

Opposition party lawmakers have been vocal about the negative impact of higher inflation as prices are increasing when wages are not, with them particularly taking aim at the depreciation of the yen driven by the BOJ's monetary easing program that has caused import costs to increase.

The summary of opinions was compiled by Kuroda and does not attribute comments to individual members.

Ideas:

Opposition party lawmakers, globally, are always trying to find areas where they can contend with what the majority party is doing. 

So the opposition party has siezed on the idea of inflation and wages, when Prime Minister Kishida has already been trying to get companies to increase wages as inflation is also increasing.

Perhaps it would be a good idea in the diet debates on NHK to for the oppostion party to give their ideas to help the economy, which they have done with Prime Minister Kishida always nodding his head to show he understands what the opposition party is saying. 

The Bank of Japan as many central banks,at least in the open, don't interfere in the movement of the exchange rates currencies and for the most part let them float as is.

One of the reasons they don't interefere in the exchange rate floating as they don't want to be seen or labeled as a currency manipulator and be sanctioned or similar ideas related to the US and how they view what some Asian countries do with their currency.

What the Japanese government has done is give subsidies to oil distrubutors and importers as an incentive to not pass on their costs to the next in the supply chain.

Of course the weak yen has been positive for exporters but a negative for importers. While not manipuating the yen directly all or most central banks have a set of tools that they can indirectly move the currency in one direction or another without actually directly manipulating its currency. 

Exports in Japan have been a powerful tool to help and grow the economy and as such the Bank of Japan is going to keep an easy money policy for the time being until it sees the domestic economy begin to get back to the pre-pandemic level and the inflation rate at or near the 2.0 level.

Have a nice day and be safe!

Japan Oil Distrubutor Subsidies: Update Feb. 12

        Article Source:    https://mainichi.jp/english/articles/20220125/p2g/00m/0bu/047000c

Article:

TOKYO (Kyodo) -- Japan's industry minister Koichi Hagiuda said Tuesday the government will implement for the first time its oil industry subsidy program, which is aimed at curbing petroleum fuel prices starting later this week following a recent surge in oil prices.

The nation's average regular gasoline retail price was 170.2 yen ($1.5) per liter as of Monday, reaching its highest level in over 13 years and topping the 170-yen threshold required to launch the subsidy scheme introduced in November, Hagiuda told a press conference.

Under the program, a subsidy of 3.4 yen per liter will be paid to 29 oil distributors and importers for a week starting Thursday with the aim of keeping them from sharply raising their prices of gasoline, diesel oil, kerosene and fuel oil, according to the ministry.

Ideas:

The subisidy program, in itself, might be a good strategy to keep importers and oil distrubutors from increasing prices, which might be becoming too high for companies and consumers. 

As global prices continue to increase oil distributors and importers, to manage their profit margins they have no choice but to pass on their increased costs to the next in the supply chain.

While this might be considered normal economic or business activity, if it becomes too much then other parts of the economy begin to feel the stress from continual increased costs.

Company profit margins begin to become stressed, households begin to feel the stress of less disposable income, especially the lower middle class and the middle class. 

But of course there is always those who might say, too much government interference or influence in a market economy is not good and its too disruptive and or they say let the market be as it is and let it fix itself overtime.

That might sound like logical idea to let the market be and let it work out its kinks, so to say, but the problem is that there might be some real challenges for some groups in the economy and society if the government doesn't step in every now and then to correct any market inperfactions. 

But the challenge is when to step in and when to step back from any help a government gives the market. Too little and those groups might not see any benefit, and too much and it might have too much of an affect and affect the market unaturually causing more harm than good.

Article:

"As for petroleum product prices, regional differences have been seen, but I expect this program to suppress wholesale price rises and prevent further sharp price hikes in each region," Hagiuda said.

The size of subsidies will be reviewed by Feb. 3 according to changes in retail gasoline prices. The subsidy framework will be effective until the end of March, a ministry official told reporters.

The ministry official attributed the recent oil price rises to the U.S. Federal Reserve's view that the impact of the Omicron coronavirus variant on the economy will be temporary as well as supply concerns in oil-producing nations and growing military tensions in Ukraine.

Ideas:

The Bank of Japan needs to be careful and decide its own strategy for Japan and not base it on what the U.S. Fed. does as each country has its own unique circumstances what works i the US or the EU might not fit the Japanese economy. 

While the EU and the US might be exerpiencing record inflation levels Japan hasn't even reached te 2.0 level that the BOJ has been trying to get to for many years.

Last report was the Japan CPI was at maybe 1.1 which is still far below the 2.0 level. But even though its at 1.1 it might be more than what Japanese consumers want as maybe they are feeling the affects of increased energy prices, increased supermarket/food prices, and maybe increased prices at some restuarants.

At the present time Tokyo and Japan is feeing the affects of the omicron situation. While some seem to think it might peak soon, there is no way to tell exactly. 

Of course there might be the concern how is the omicron situation going to affect consumer spending, when for example, there were 18,000+ cases alone in Tokyo yesterday.

But now it seems there is the idea that the omicron variant might not be much more than a severe flu at most.

But that might not be a good argument when the news on Thursday reported 149 lost their lives to the virus.

So the omicron variant is here, and it is spreading but what affect exactly is it having on the services industry which for the past two years as seen the worst of the virus situation.

At any one time, in the global economy, there are always different situations taking place. Whether wars or rumors of wars. Whether natural and environmental disastors, or serious economic situations, there are always many actions taking place which can affect many economies around the world, as every country is now closely interconnected.

All a country can do is asses each situation and come up with the best strategies to prevent any situation from affecting it as much as possible.

Article:

The subsidy program has been criticized as a market-distorting measure and an excessive intervention by the government.

The Japanese oil industry has blamed a series of petroleum-related taxes for the country's high fuel prices. According to the Finance Ministry, taxes account for over 50 percent of the retail gasoline price per liter before a 10-percent consumption tax is levied as of the second quarter of 2020.

"This measure is just a tentative and emergency step to ease the pain from radical changes so that (the surge in gasoline prices) would not weigh on the economic recovery from the pandemic," the official said.

The government has decided to set aside 80 billion yen for the subsidy program in its supplementary budget for the current fiscal year through March.

Ideas:

Yes, again, as mentioned above, there those who might think a government should not interfere in normal market economy activities. That seems logical as many times there has been too much intervention. 

But the problem again is some groups in society might need help in overcoming the increase in prices. 

Of course taxes can be both a positive and a negatives. Taxes that are too high tend to reduce some economic activity. Taxes that are too low might not have the affect of providing the government with needed funds.

With regard to the idea of market distortion, which is affecting the market in a way that affect the normal acitivities of a market or the idea of affecting competition in the market. 

But if all oil distributors and importers are getting the same subsidy maybe it shouldn't considered a distortion or affecting market competion.

However, if taxes do account for 50 percen to the retail gasoline price, that intself might not be a distortion, but it certainly can have the affect on cosumers who might feel gasoline prices are now getting too high and they might seek out alternatives if they can such as trains/subways instead of driving their cars.

At some point taxes can begin to have a negative affect on society and the economy, and maybe gasoline prices related to the taxes placed on them is not getting not providing the benefit to society or the economy as intended.

Have a nice day and be safe!