Japan Govt. Stimulus:

 Article Source:  https://mainichi.jp/english/articles/20220331/p2g/00m/0bu/002000c

Article:

TOKYO (Kyodo) -- Japan is considering spending over 1 trillion yen ($8.1 billion) on a new stimulus package to cushion the impact of surging energy, commodity and grain prices stemming from Russia's invasion of Ukraine, government sources said Wednesday.

The package will mainly see increased support for sectors that rely on fuel or grain, such as transportation as well as the agriculture, forestry and fishery industries, the sources said. Prime Minister Fumio Kishida instructed ministers a day before to start crafting the package by late April.

Ideas:

This sounds like a very good plan to help any sector that is suffering from increased raw material prices. 

The market, initself, can only do so much, and sometimes the government, temporarily, needs to step in and help the market as much as its can.

But of course there are always going to be some who say there the market take care of itself over time meaning prices will eventually stabalize and the market will move back into some kind of equilibrirum.

The problem with that approach is there is no telling when the markets turn to normal and how many companies and how many consumers have to suffer because of unwanted high prices that was neither the companies doing or the doing of increased consumer demand.

Article:

Kishida has said the fresh stimulus will be designed to help Japan's economy recover from the coronavirus pandemic and focus on four areas -- higher crude oil prices, stable food supplies, funding support for small and midsized companies and assistance to people in need.

Businesses in the transportation and farm sectors have been especially impacted by the higher prices due to their reliance on gasoline, diesel and fuel oil for engines and grain for livestock feed.

Companies such as taxi operators and firms carrying people and goods to remote islands are expected to be eligible for the aid, the sources said.

Ideas:

Again a very good idea to help in these four areas. Its very unfortunate, that in the news recently, some crude oil companies are having record profits while those who need the oil are suffereing with higher prices. 

The oil markets seems way out of balance as some manufacturers or producers are reaping very high profits while most of the companies needing the oil are now having to pay record high prices. That doesn't sound like a market that is in equilibrium, or fairness for all in the market.

Food supplies are another major problem, not just in Japan but globally. As raw material prices related to food continue to increase its good that the Japanese government is stepping to help whomever, food producers, raw material importers, the fnal consumers and so on.

And of course its even more very good that the Japanese government is continuting to help smal and midsized companies that might still be trying to recover from the pandemic situation.

And finally there are probably many families and people who still need help related to the pandemic and its good that the Japanese government is continuting to help them too.

Any and all kinds of assitance should be continued for as long as possible, even into the summer and into the fall as the pandemic lasted two years which is very long time for many businesses and families to have to endure less that good conditions.

Article:

To finance the package, the government and the ruling coalition plan to use some of the 5.5 trillion yen reserve funds in the fiscal 2022 budget. The funds include those set aside for the COVID-19 response.

The government aims to develop the framework of the package by mid-April and receive Cabinet approval to use the reserve funds later that month, the sources said.

Ahead of the election of the House of Councillors in summer, the government is considering drafting an extra budget for fiscal 2022 to put together another relief package.

Ideas:

Whatever needs to be done to help the Japanese economy and those sectors that have been heavily impacted by the pandemic should be done, even if it means one or two more extra budgets.

Japan seems to be unique in that they are sparing no expense to do whatever is needed while some other countries might say we can't spend that much or use that much.

Japan seems to always be a big government spending country while other countries might use a different strategy to help or fix different situations.

Of course there are those who are going to say Japan's debt to GDP is just too high for this much spending. But the pandemic was most likely a once in a century situation and drastic spending measures have been needed to help in whatever way possible.

Have a nice day and be safe!

Japan Manufacturer Sentiment:

 Article Source: https://mainichi.jp/english/articles/20220401/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Business confidence among major Japanese manufacturers worsened for the first time in seven quarters in March, hurt by energy and raw material costs that surged on Russia's invasion of Ukraine and pandemic-related supply bottlenecks, the Bank of Japan's Tankan survey showed Friday.

The key index measuring sentiment among companies such as automakers and electronics makers dropped to 14 in March from 17 logged three months earlier, the lowest level since June 2021. It was above the average market forecast of 11 in a Kyodo News survey.

The index for large nonmanufacturers, including the service sector, fell to 9 from 10 in the previous survey in December, highlighting the severe blow dealt by restrictions imposed in response to the COVID-19 pandemic. The reading also marked the first deterioration in seven quarters.
Ideas:

Business confidence always goes through periods of ups and downs and now it quite obvious with the increasing prices of energy and raw materals and the Ukraine situation that businesses are not feeling too good at the moment.

And then add in the challenges in China with the shipping and pandemic situations continuing on and business confidence is probably even worse.

Its probably going to take some time before businesses finally begin to feel good about the future. It might even happen in 2022 as most likely energy prices and raw material prices will continue to increase in Japan and globally.

Article:

The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones.

Russia's attack on Ukraine that began on Feb. 24 has sent crude oil and commodity prices sharply higher amid a spike in geopolitical risk and supply concerns. Russia is a major exporter of crude oil and natural gas.

The yen has been falling sharply against major currencies such as the U.S. dollar and the euro, inflating the cost of imported raw materials.

Ideas:

First there was the 2 year long pandemic that kept businesses challenged along with the Japanease government suggestions related to reduce some economic activity. Then there was the double threat of the delta virus and then the omicron virus with kept the situation going.

And then add in the semiconductor chip challenges which has effected some or many comapnies in Japan and globally which has slowed down business and economic growth.

And now add in the Ukraine situation and it gets even more challenging.

And finally add in the weakening yen, and the situation becomes even more complicated for Japaneses businesses and the economy. 

Article:

"The results reflect increasing worries among companies about surging raw material costs. The situation in Ukraine and the yen's recent sharp depreciation are making it hard for many firms to be optimistic," said Toru Suehiro, a senior economist at Daiwa Securities Co.

Higher costs are threatening to erode profits with wholesale price inflation accelerating at its fastest pace in decades. Sentiment among firms in sectors ranging from pulp and lumber to chemicals and food all deteriorated.

The surge in costs comes as manufacturers have been grappling with parts shortages caused by the COVID-19 pandemic.

Ideas:

So even though the pandemic appears to be winding down, the after effects seem to be just as bad as if it were the pandemic.

Just how long are all of these challenges going to last is another challenge in itself. If businesses knew when the challenges would end or begin to subside they might be able to see some light at the end of the tunnel and begin to plan for the future instead of being in survival mode that maybe some might be in now.

Most likely the suggestion by Prime Minister Kishida for companies to increase wages by at least 3 percent is most likely not going to happen as profits are eroding and there doesn't seem to be an off ramp for any of the current economic challenges at this time.

The continued parts shortages is another challenge that many manufactures have to deal with along with all of the challenges.

Article:

Japanese automakers, including Toyota Motor Corp., have been forced to cut output due to difficulty in procuring parts such as semiconductors.

Confidence in the auto sector fell further to minus 15 in March from minus 8 in December, though it is projected to improve to minus 1 in the coming months.

Economists say a growing number of companies are protecting profits by passing on higher raw material costs to consumers.

Ideas:

Business confidence might improve some but its a long way  to go before we see any kind of real positives from businessess.

When business confidence is not where it should be, most likely there is not going to be new investments, any new projects, and most likely no increases in wages any time in the near future.

As prices related to many things can companies need continue to increase, companies have no choice but to pass on some or all of their increased costs. Before most companies probably absorbed their increased costs and even though their profit margins might not have been where they wanted them to be.

But not as prices just keep going up and profit margins just keep shrinking, they might think they have no choice now and have to pass on or all of their costs.

Article:

"As the infection situation stabilizes, service providers are expected to see a recovery in demand," Suehiro said. "But consumers, who have to pay more for energy and food items due to price hikes, may have to cut spending on services (such as entertainment and travel), pressuring corporate earnings over the longer term."

The lingering impact of the COVID-19 pandemic was also felt among service providers including hotel operators, restauranteurs and retailers, as anti-virus curbs were in place in Tokyo, Osaka and other areas until March. Despite a recent improvement in the infection situation, concerns have grown about the spread of the more transmissible BA.2 Omicron subvariant.

Hotel and restaurant operators were deeply pessimistic, with the index at minus 56, down 5 points from December, according to the survey.

Ideas:

The services sector was hit the hardest during the pandemic as person to person contact was limited or even discouraged 

So consumers/customers were staying away which made it difficult for many service type businesses. And now there is the double threat of energy and food price increases which might cause some consumer to either cut back and or find substitutes for what they usually buy.

But to be somewhat positive, the Japanese economy is still the 3rd largest economy in the world. So despite some or many challenges, it doesn't mean everyone is not spending money in the economy.

Yes there might be significant drop in consumer spending but that doesn't mean the entire economy is now dead. We need to keep things in perspective if we can that the Japanese economy continues to operate even at a reduced level.

Article:

Over the next three months, sentiment among manufacturers is expected to worsen further to 9 while that among nonmanufacturers will likely fall to 7, according to the Tankan survey.

Large companies, defined as those with 1 billion yen ($8.2 million) or more in capital, expect a 2.2 percent increase in capital spending for the current business year through next March. For the just-ended business year, it is expected to have increased 5.9 percent.

The yen tumbled to an over six-year low last week amid the prospect of diverging monetary policies between the BOJ and the U.S. Federal Reserve, which is expected to go ahead with multiple rate hikes this year.

Ideas:

Business sentiment might drop but what does that really mean, as businesses are made up of people and people can changes their minds about what they want to do and how they feel about things.

So even though we see a not so good business sentiment some companies are still going to invest in capital spending as maybe they might think, when economic conditions are not so good, that might be the best time to invest and then be prepared for when the economy does begin to improve.

Its good that the BOJ is not following the same path as the US Federal Reserve  as each economy is a unique organism with its own unique challenges. What might work in the US or the EU might not work in Japan.

Article:

Companies in the Tankan survey expect the dollar to average 111.93 yen, much lower than the 122 yen zone seen recently. The euro is projected at 128.18 yen for the current fiscal year.

The BOJ surveyed 9,362 companies, of which 99.1 percent responded between Feb. 24 and Thursday.

Ideas:

A weak yen used to be a positive for exporters and a negative for importers. Some in the Japanese government used to think a weak yen was good for the Japanese economy as it brought in more income from exporters.

But maybe now its become too weak as now import prices, combined with increases in energy prices and raw materials prices has caused too many unexpected challenges for the Japanese economy.

If it was just one or the other, meaning a weak yen only or increases in raw materials and energy prices only then one or the other alone might be livable or acceptable.

But with the combination of factors it puts too much pressure on the businesses and the Japanese econony, not to mention on consumers and consumer spending.

Have a nice day and be safe!

Japan Food Prices:

 Article Source:   https://mainichi.jp/english/articles/20220331/p2g/00m/0bu/006000c

Article:  

TOKYO (Kyodo) -- Japanese consumers are expected to face more challenges amid the ongoing coronavirus pandemic, as a wave of price hikes will hit essential items such as food and daily goods in the new fiscal year beginning Friday due to the rising cost of raw materials.

Since there will be changes in fiscal 2022 in some social systems closely related to people's day-to-day living, such as the lowering of the amount of public pension benefits, the rising prices are likely to squeeze socially vulnerable people like pensioners particularly hard.

For example, Megmilk Snow Brand Co., Meiji Co. and Morinaga Milk Industry Co. will raise their prices for cheese, while The Nisshin OilliO Group Ltd. and J-Oil Mills Inc. said they will increase their prices of cooking oil for household use.

Ideas:

Japanease consumers most likely will continue to see increases in inflation and at the same time, more and more companies will probably feel they have no choice but to now increase the prices of their products after years of being reluctant to increase prices as they often say consumers in Japan are very price conscious and any price increase might cause them to look for subsitute products.

The lowering of public pension benefits at this time is probably not a good idea and inflation of daily products are going up and if these people are on fixed incomes its going to make their lives even more difficult.

The Japanease government, at this time, shouldn't reduce benefits as inflation, even though its not as much as in other countries is still a lot for some groups.

Article:

Other food items subject to the upcoming price hikes include Kagome Co.'s tomato ketchup and Yaokin Co.'s "Umaibo," a popular snack meaning "delicious stick" that has been sold at 10 yen ($0.08) without tax for more than 40 years.

The new price of "Umaibo" is set at 12 yen, according to the snack maker based in Tokyo.

Regarding daily goods, factory prices of Nippon Paper Crecia Co.'s tissue and toilet paper, as well as those of some diaper products of Kao Corp. will go up.

The major transportation system in the country is no exception either.

Ideas;

Many companies look like are going to increase their prices. But by how much is the real question in terms of are they fully passing all of their increased costs to the consumer, are they doing it slowly in stages, are they only passing on some of their costs and not all.

Inflation seems to be in many if not all countries now. But its seems to be less in Japan for whatever reason. Is it becasue companies have been very reluctant to pass on their costs and have accepted smaller profit margins and also decided they will not increase the salaries of their employees as recommended by Japanese Prime Minister Kishida.

As prices begin to increase in Japan, how are the Japanese consumers going to respond or react to the prices increases. Are they going to just accept the increases as just a normal part of society now. Are they going to cut back on some of their spending. Are they going to look for subsitutes at a lower price if they can. 

Article:

East Japan Railway Co. will effectively raise ticket prices of shinkansen bullet trains during the high season, and Kyushu Railway Co. will lift the prices of some coupon tickets for the bullet trains.

Japan Airlines Co. will raise ticket prices of some domestic flights from April 15, while those of All Nippon Airways Co. have already gone up since Sunday.

Bridgestone Corp. and the Japanese arm of French tire giant Michelin will raise the prices of their tires.

Ideas:

As the pandemic, it appears, begins to trend downward, maybe many companies have been waiting to finally being to increase some of its prices as raw material prices and energy prices have been increasing for some time now.

Maybe the spring and the Golden Week period, when demand is highest companies feel its the best time and maybe customers/consumers won't be a reluctant to not buy or use the services of airline, trains, and bullet trains.

After the Golden Week period ends and things begin to get back to the day to day normal activities it will be interesting to see just how much customers and consumer begin to react to all of the prices increases in the Japanease economy.

But as the pandemic winds down, maybe people just want to get out and about and just want to do things even though prices are higher now.

Article:

As for Japan's public pension system, the amount of benefits will decrease by 0.4 percent as wages have gone down due to the influence of the pandemic.

The age bracket to start receiving the benefits will become wider, now raising the upper age limit to 75. Currently, those aged between 60 and 70 can begin receiving a pension.

Ideas:

Its seems like the pension systems is every country, because of the pandemic and other factors, are under extreme stress.

But I don't think reducing the pensions is the best strategy at this time. Inflation might be here for a while and inflations always effects the lower income or fixed income groups the most.

It might be a very good idea, like in the US, if companies in Japan didn't have a required retierment age. Just let people work for a long as they want.

And then maybe after age 60 or 65, for example, set a limit on the salary as to not effect companies too much.

So if a person wants to continue working past 65, they can continue to work, but they aren't elgible for any more salary increases and the will remain at the same salary for as long as they continue to work for that company.

And or the employee can remain at the company with a reduced salary of say 3/4ths or 1/2 of what their salary was.

In that way, it might reduce the stress on the pension system and companies will share in the helping society and not just the government.

Have a nice day and be safe!

Japan's Core Consumer Prices:

 Article Source:  https://mainichi.jp/english/articles/20220318/p2g/00m/0bu/024000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices in February rose 0.6 percent from a year earlier as energy costs surged at the fastest pace in 41 years due to higher oil prices, government data showed Friday, suggesting further increases amid the fallout from the Ukraine crisis.

The nationwide core consumer price index, excluding volatile fresh food items, advanced for the sixth straight month following a 0.2 percent rise in January, the Ministry of Internal Affairs and Communications said.

Energy costs such as gasoline and electricity soared 20.5 percent, the steepest rise since January 1981, reflecting higher crude oil prices amid the global economic recovery from the coronavirus pandemic. The figure compared with a 17.9 percent increase in the previous month.
Ideas:

Japan's core CPI prices most likely will continue to increase becuase global inflation seems to be a major challenge now for many countries.

Global energy prices don't seem to be falling or going away as they seem to here to stay for a while.

The question is are Japanese companies now willing to pass on their increased costs to the next in the supply chain or are they going to just accept the increased costs meaning thinner profit margins for now and the future.

The core CPI with an increase of only 0.2 percent, in itself, is still not bad, but it could get worse in the future.

Article:

Electricity bills, which normally take several months to reflect oil prices, jumped 19.7 percent, the biggest rise since March 1981. Prices for kerosene and gasoline climbed 33.5 percent and 22.2 percent, respectively.

Japan depends on energy imports and the recent sharp depreciation of the yen has inflated costs.

The uptrend in energy prices could accelerate in March and after, affected by further advances in gas and oil prices due to the Russian invasion of Ukraine, a ministry official suggested.

Ideas:

Japan for a long time maybe didn't feel or see the global prices changes that many other countries were experiencing. But now it seems Japan too has seening the kind of inflation increases the rest of the world is seeing.

So again, are companies, like usual, going to absorb the prices increases they incur or are they going to begin to pass on some of the increased cost to the next in the supply chain which means of course it might reach the final consumer.

An increase of 19.7 percent in electricity bills might not be much for some or many for the low-income earners and those on fixed incomes it could be too much.

So what is the Japanese government going to do about how the higher energy prices might affect some groups in Japan. Are they going to provide some kind of subsidy to help low-income groups. Are they going to give subsidies to energy providers as a way to not pass on their increased costs to the next in the supply chain.

Article:

Food prices increased 1.6 percent, partly due to rising wheat prices that have made bread more expensive. Potato chip prices were also up amid higher food oil and logistics costs, the official said.

Mobile phone fees sank 53.6 percent after major Japanese carriers lowered them in the spring of last year at the request of the government.

Stripping the drag from mobile communication fees, core CPI climbed to around 2 percent in the reporting month, hitting the Bank of Japan's inflation target, some analysts said.

Ideas:

An increase of 1.6 for food prices again might not be much for some groups and maybe some groups might not even notice or care that much. But for some groups it could be too much, as maybe some consumers might be price sensitive to some kinds of products and now will begin to look for subsitute products with the same value.

Logistics costs will continue to go up because of the lock down situation going on in China, as products in and out of China are not moving. And then add in the continued increase in shipping costs since the pandemic will continue to put pressure on prices. 

And then add in the increase energy costs of containers ships and others and prices are going to continue to go up.

Mobile phone fees might be going decreasing but mobile phone carriers will find ways to maintain their profit margins with prices increases in other services or products.

Article:

But Takeshi Minami, chief economist at the Norinchukin Research Institute, said, "The core CPI's rise does not necessarily mean that consumer demand is strong."

"Being hit by the yen's depreciation as well as high raw material and fuel costs, companies have been forced to raise prices to stay in the black," he said.

Minami expects the core CPI to surpass 2 percent in the middle of 2022, after the impact of lower mobile phone fees falls out of the year-on-year comparison in the data.

Ideas:

The core CPI prices increases doesn't always correlate with an increase in consumer demand as Japan has always had a challenge with consumer spending.

So the situation is not related to an increase in consumer spending but more of an increase in supplier inflation, with some of it related to costs most likely being passed on to the consumer.

Because of increases in raw material prices, feul/energy prices and companies now being forced to pass on their incresed costs to the consumer, consumer demand is not going to be as strong as it should be becasue consumers now have less extra income to spend and will seek out substitute products and or cut back selectively and only buy what they need.

Just because the core CPI reaches the 2 percent level doesn't mean that it has reached the Bank of Japan's goal of 2.0 percent inflation as the inflation is mostly related to supplier cost increases and not an increase in consumer spending.

Article.

Higher inflation due to fuel costs would drive speculation among investors that the BOJ may scale back its aggressive monetary easing, he said.

The so-called core-core CPI, which excludes both fresh food and energy prices, declined 1.0 percent from a year earlier, falling for the 11th consecutive month.

Ideas:

Most central banks and the US Federal Reserve seem to think that increasing the key interest rate is the best way to solve the inflation problem facing many countries now.

But the problem with increasing the key rate is it places a lot stress on some groups in an economy.

If a company needs a loan now because of its increase in raw materials or because of an increase in energy costs, in order to get through the next six months, now it has to pay even more putting even more stress on companies.

If a family just got a new home and now has a mortgage they now have to pay even more for that new home because of the higher interest rate.

If a family needs an emergency loan for something they now have to pay even more which again places even more stress on the family.

So the Bank of Japan needs to not follow what other central banks are doing as increasing the key interest rate might not be in the best interest of the Japanease economy and Japanese society.

It be better for the Japanese government and the Bank of Japan to provide needed subsidies as many families and many businesses are still not back to the pre-pandemic level

Once international tourism can get back to the pre-pandemic level then maybe the Bank of Japan can begin to think about scale back its monetary policy and begin to follow what other central banks are doing to reduce inflation.

Have a nice day and be safe!

Japan Trade Deficit:

 Article Source:  https://mainichi.jp/english/articles/20220316/p2g/00m/0bu/031000c

Article:

TOKYO (Kyodo) -- Japan posted a goods trade deficit of 668.3 billion yen ($5.6 billion) in February, logging red ink for the seventh consecutive month as the cost of energy imports continued to grow, the Finance Ministry said Wednesday.

Imports grew 34.0 percent from a year earlier to 7.9 trillion yen, rising for the 13th consecutive month, the ministry said in a preliminary report, as purchases of crude oil especially from the United Arab Emirates and liquefied natural gas from Australia were more expensive.

Ideas:

Japan most likely for the time being is going to have a trade deficit until either the energy markets can stabilize and or until the Japanease yen can get back to a weak zone that is beneficial to the overall economy.

The Ukraine/Russia situation has not helped and Japan is in no position to be able to join the EU in boycotting Russian oil at this time.

Part of the problem is that Japan, at the moment, has too few energy resources other than to import coal, gas, and oil as Japan essentially abanded nucleur power after 2011, which in itself is a very efficient fuel source, despite the challenges of 2011.

Global energy suppliers watch very carefully what is happening in all energy markets globally and if the price of oil and gas is going up in other markets or suppliers then those other suppliers are going to do the same thing.

As a result there is no cheap energy sources and Japan has to pay whatever the market charges. And then of cousre add in the weak Japanese yen and the price of energy in Japan gets even higher.

Article:

Crude oil imports jumped 93.2 percent to 808.6 billion yen, up for the 11th straight month, also on the back of the yen's depreciation against major currencies and Russia's invasion of Ukraine.

But a ministry official said it was difficult to tell how much the preliminary report reflected the impact of the invasion on import costs as Russia's assault began on Feb. 24.

"We will look closely at the impact of the Ukraine crisis on the Japanese economy," the official added.

Ideas:

In many cases countries might buy patches of energy months in advance on maybe the futures market at the price for that day. So even if they bought energy from Russia in January or February, and at that time paid a certain, to be deliverd maybe in May, that means whatever has happened since that time doesn't change the price they paid for January, when its delivered in March or April

But even in January and beyond the price of oil and gas had been going up steadily which has put a strain on the Japanese economy and now most likely companies that use a lot of gas and oil now have to pay even more and they might or might not pass on the costs to the next in the supply chain.

Article:

Exports rose 19.1 percent to 7.2 trillion yen, up for the 12th straight month, driven by robust demand for light oil in Australia. Iron and steel product shipments to South Korea and auto exports to the United States also contributed to the increase.

All figures were compiled on a customs-cleared basis.

Ideas:

Like South Korean, Japan is a major oil refiner meaning the process crude oil and ship it out as an export to other countries like Australia.

The iron and still exports to South Korea are most likely going to the large ship manufacturing companies located on the east coast of South Kore along the the large car manufacturers in the same area.

As South Korea recently elected a pro-business presidential candidate, it will be interesting to see if Japanese businesses and South Korean businesses start to work more closely together, despite having very similar industries and exports products, which makes them competitors in many areas.

Have a nice day and be safe!