Japan's Core Consumer Prices: Updated Feb. 5

 Article Source:    https://mainichi.jp/english/articles/20220121/p2g/00m/0bu/020000c 

Article:

TOKYO (Kyodo) -- Japan's core consumer prices rose 0.5 percent in December from a year earlier, driven by higher fuel costs and a weak yen that have threatened to cool consumer sentiment, government data showed Friday.

The nationwide core consumer price index has been in a tug-of-war between higher energy prices, including for crude oil, and sharply lower mobile data fees, which fell 53.6 percent in December following reductions by major carriers amid government pressure.

The headline figure marked the fourth straight month of year-on-year increase, according to the Ministry of Internal Affairs and Communications.

Ideas:

Consumer prices seem to be on the increase in Japan but not compared to other countries. But for Japanese consumers who are very price sensitive it might seem like prices for some things are now becoming too high. 

Maybe the price increases are not affecting some in the population but for the lower middle class, the middle class, those on fixed incomes it might be a lot for some of them.

And yes the consumer price index might be in tug-of-war between various products or commodities as some are increasing and some are decreasing., its in a state of flux or in a state of confusion now as to whether it will continue to increase or decrease and then add in in the weak yen, which is increasing importers which most likely will be passed on the next in line.

Article:

Stripping the drag from mobile communication fees, the core CPI rose close to 2 percent, a target set by the Bank of Japan.

Some economists say the core CPI is expected to rise toward 2 percent in coming months as the year-on-year mobile fee impact that began in the spring of 2021 is expected to dissipate while energy costs remain high.

That prospect puts the BOJ in a complex situation as it needs to maintain its ultraloose monetary policy for an extended period, while rising wholesale prices would cut into profitability and higher goods prices could prompt consumers to curb spending without strong wage growth.

Ideas:

Just what does "stripping the drag" mean exactly. Why not just say "take away the decrease in lower mobile communication fees" etc. 

The effects of the lower mobile fees by now have probably waned on consumers, meaning most if not all consumers have taken advantage of the lower fees and its not going to bring any more consumers for the mobile carriers.

There is a phrase called...." be careful what you wish for".... meaning if the CPI does get to the 2.0 percent level, which has been the BOJ's goal for many years, the Bank of Japan now has to be concerned with what consumers are going to do if consumer prices begin to get too high for them or some groups.

Energy prices seem to be affecting all parts of the economy and society as businesses need energy, oil, gas, coal for manufacturings, business and whomever need energy for their large buildings and so on, and households too have to contend with higher engery prices in their homes, not to mention higher gasoline prices for their cars.

And as the CPI increases consumers are not having to pay higher prices for many things in the stories and supermarkets. But of course many businesses might still be reluctant to pass on some of their costs, meaning they have lower profit margins which means less room for salary in increases in April 2022 and less for future investments among other things.

The BOJ should maintain is ultraloose monetary policy until the economy getsa complete all clear sign and even after from the pandemic because many businesses are not all going to recover that the same rate, meaning its going to take time for full and complete recovery of the Japanese economy.

Article:

In December, energy prices rose 16.4 percent from a year earlier, the fastest gain in over 13 years, also boosted by a weaker yen that inflates import costs. Kerosene prices jumped 36.0 percent and gasoline prices climbed 22.4 percent, according to the ministry data. Electricity bills increased 13.4 percent, the steepest rise since March 1981, reflecting higher crude oil prices.

The so-called core-core CPI, which excludes both fresh food and energy items, fell 0.7 percent, down for the ninth month in a row.

In 2021, core consumer prices dipped 0.2 percent, marking the second straight year of decline, dragged down by the impact of cheaper mobile fees.

Ideas:

All of these numbers being mentioned might sound interesting to some but for consumers and businesses all it means is prices are increasing around them. 

Some might not see anything but for some increases in energy costs or increases in food costs might have a major affect on them if they fixed income, low income or even middle income which means they now have less disposable income to spend on other things in the economy.

But there seems to be two viewpoints here. One viewpoint seems to be that whomever keeps talking about how lower mobile fees are hurting the CPI, as if lower fees for consumers is a bad thing. Of course there are always positives and negatives in any economic situation.

So while lower mobile fees might be good for consumers, they of course might not be good for mobile carriers. But mobile carriers will find ways to maintain profit margins by increase prices on other product or services.

But the main idea is some seem to think its not so good a thing for the CPI. 

But the other idea is all the talk about the BOJ and getting the CPI to the 2.0 level, and not that it might be happening or might be headed in that direction, now the debate seems to be consumers are going to weary of price increase.

But at the same time, that is an economy, meaning there are many different economic actions, both positive and negative taking place at the same time. An economy is very complex and as such there are always going to be multlple factors interaciting within an economy at the same time.

But only real variable that matters is what affects each of the actions have on businesses and consumers now and in the future, and how to they respond to all of the economic actions taking place.

Have a nice day and be safe!