Japan's Wholesale Prices:

 Article Source:  https://mainichi.jp/english/articles/20220210/p2g/00m/0bu/035000c

Article:

TOKYO (Kyodo) -- Wholesale prices in Japan gained 8.6 percent in January from a year earlier as higher energy and raw material costs continued to add upward pressure, Bank of Japan data showed Thursday.

The pace of year-on-year increase slowed slightly from a revised 8.7 percent in December, the second-highest gain on record. Wholesale prices rose for the 11th straight month, also due in part to the weakening of the Japanese yen that has inflated import costs for energy-scarce Japan.

Import prices soared 37.5 percent, compared with a 12.5 percent gain in export prices, both in yen terms, the BOJ data showed.

Ideas:

Wholesale and import prices are most likely going to continue to increase as long as the pandemic continues and global supply and energy prices continue to increase.

There doesn't seem to be an end or exit ramp at this time as world events continue to cause challenges to many economies.

The Japanese yen and its falling is good for exporters but not good for importers. But maybe if it falls too much, those who buy Japanse products globally might begin to think the price they pay for Japanese products is getting too high.

So maybe there is limit on just how weak the Japanese can get before global consumers/customers begin to think that Japanese products are now too expensive.

And of course its even worse for Japanese importers as the weak yen drives up prices they have to pay for whatever they brining into Japan.

Article:

Economists and BOJ policymakers are keeping tabs on how the recent uptrend in wholesale prices will affect consumer prices as core consumer inflation has also been rising in recent months, though the Japanese central bank's 2 percent inflation target is still far off.

A growing number of Japanese firms have been passing on higher raw material costs, which would eat into their profitability, to consumers by raising retail prices. But higher consumer prices risk hurting demand at a time when the country's economic recovery from the COVID-19 fallout remains fragile, economists say.

Prices of petroleum and coal products rose 34.3 percent from a year earlier, reflecting higher crude oil prices.

Among raw materials, the price of lumber and wood products surged 58.5 percent, slowing from 60.6 percent in December but staying at a high level. Iron and steel prices were up 25.1 percent and nonferrous metal gained 26.5 percent.

Ideas:

There are two ways to look at the situation. One way is to think that maybe prices have been too low for too long in Japan and that an increase in prices might be a good thing for the Japanese economy and consumers need to get used to the overall increase in prices.

An overall increase in prices might actually help businesses in the long run and then as consumers/customers get used the higher prices they begin to understand that the higher prices are just part of the economy.

And then maybe the sales at businesses will increase and their profit margins might increase and then they can acually begin to increase the salaries of their employees as needed.

But the other way of looking at it, as the supply costs of some businesses continue to increase they have no choice but to pass their increase in supply costs to the next in the chain, whether its other companies or whether its the final customer/consumer.

So in the second scenario both the consumer and the business face challening situations as consumers don't buy and businesses lose sales as their profit margins decrease which means less economic growth in the Japanese economy.

Of course there are always going to some positives and some negatives in an economy. As prices continue to increase consumers will begin to look for subsitutes or alternatives to buying or what they do which means some businesses might actually gain.

But the economy keeps moving foward with as in a market economy there are always changes taking place, with some companies doing better than other companies.

But maybe now is the time for the price-sensitive Japanese consumer, for the most part, or with other things equal, to recognize that prices in Japan can't stay in the de-flation zone and need to get to the point where they are at a natural level so that the economy can see some kind of equilbrium meaning prices and profts are normal and not too low for what they should be.

But that is saying a lot and most likely the Japanese government will step-in with some more economic measures to help those groups that have no control over the higher prices in the economy.

Have a nice day and be safe!