The Bank of Japan and the Yen:

 Article Source:  https://mainichi.jp/english/articles/20220429/p2g/00m/0bu/002000c

Article:

TOKYO (Kyodo) -- The Bank of Japan's steadfast commitment to a loose monetary policy coupled with the authorities' inability to stem the yen's slide could send the Japanese currency to its weakest level in more than 20 years against the U.S. dollar.

Falling below 130 yen against the dollar Thursday after the central bank left its ultraeasy monetary policy unchanged, market analysts expect the yen to test the downside toward 135.15, a level not seen since Jan. 31, 2002. Once this support is breached, the next downside target is expected at 136.05, set in October 1998.

The yen has fallen about 15 yen, or 13 percent, to 20-year lows against the greenback since early March. A weaker yen traditionally benefits Japan's export-oriented economy. However, it is now hurting the resource-scarce country, battling surging energy and commodity prices.

Ideas:

The yen may continue to weak and its looks like the BOJ has no plans to depart from its current policy of a loose monetery policy,

Japan's economy is just not strong enough to handle a key rate increase because all of the side effects to an rate increase might be too much for the already weak economy.

The BOJ and the Japanese economy might have no choice but to just ride out the weak yen and then add some measures to help those households and businesses reeling from the weak yen

A rate increase might just make matters worse on already no so good conditions for the Japanese economy.

Article:

The weakening of the Japanese currency reflects the view among market participants that the BOJ will lag central banks in other major economies in normalizing monetary policy.

The BOJ also said after its regular two-day meeting that ended Thursday that it will carry out a fixed-rate government bond-buying operation "every business day" to stem a rise in the benchmark 10-year yield above its allowed limit.

In contrast, the U.S. Federal Reserve is expected to raise interest rates by 0.5 percentage point at its upcoming May 3-4 meeting. The incremental jump would be larger than the central bank's typical quarter-point increase as it tries to stem the fastest inflation the nation has seen in more than 40 years.

Ideas:

The Bank of Japan needs to stand its ground and not be pressured by other central banks. Each economy is a differnt organism and the Japanease economy is not the same as the US or the EU.

Japan's Q1 GDP was -0.1 percent which is not a good indicator of an economy that is ready or able to handle any kind of rate increase.

The US economy is in much better shape than the Japaneae economy and as such might be able to handle some rate increases.

So is the Japanese economy an inferior economy because its weak and its growth doesn't match the US? Its a different situation but still equal to the US. 

Different economies need different strategies to manage and fix discrepencies. What works in the US might not work in Japan, and what works in Japan might not work in the US.

Article:

"The quickest way to stop the yen's fall is for the BOJ to normalize its monetary policy or for the (Fed) not to pursue interest rate hikes -- both of which are unrealistic at the moment," said Takuya Kanda, senior researcher at Gaitame.com Research Institute.

Demand for the currency of a country offering higher bond yields is often stronger. The yield on Japan's benchmark 10-year government bonds has stayed around 0.25 percent recently, compared to close to 3 percent for the 10-year U.S. Treasury yield as the policies of the Japanese and U.S. central banks continue to diverge.

The BOJ aims to attain its 2 percent inflation target through its easing policy. Governor Haruhiko Kuroda has reiterated that the bank needs to continue the nearly decade-old policy, as the inflation seen in Japan has come from surging raw material prices and lacks sustainability.
Ideas:

Its unrealistic for the US to follow what Japan is doing and its equally unrealistic for Japan to follow what the US is doing at this time.

Higher yield bonds might helpe stabalize the yen some but not completely, as the rate might be a little too low at 0.25 compared to the US at near 3 percent. Perhaps in this situation Japan and the US could be a little closer in their bond yield rates.

The BOJ's goal of 2 percent inflation is still a realistic goal but for now it might not be doable as the type of inflation the BOJ wants is more related to consumer demand inflation and not supplier cost inflation.

Just how and when supplier inflation is going to slow down is the major question to be asked now. It would be nice to know just what does the BOJ know related to when supplier inflation is going to slow down or each its plateau level.

Article:

"Many investors have priced in the fact that the Fed is likely to accelerate its rate hikes and reduce its balance sheet," said Yukio Ishizuki, a senior foreign exchange strategist at Daiwa Securities Co.

Still, the governor and Finance Minister Shunichi Suzuki have warned that the rapid pace of the yen's fall is undesirable. Kuroda has said the yen's sharp fluctuations can cause trouble for companies making business plans.

"It's desirable that currency moves are stable, reflecting both economic and financial fundamentals," Kuroda said in a press conference after Thursday's meeting. "We will be watching the impact of currency moves on the economy and prices very carefully."

Ideas:

Yes, the rapid decrease of the yen is not good overall but again Japan might not have a choice at this moment and just try to ride the falling yen and at the same time find ways to help companies and households overcome the challenges related to a weak yen.

Fluctuations are never good. Fluctuations are constant increases and decreases in whatever and businesses for the most part can't plan when the yen, for example moves up or down a lot.

If the yen was steadily up or down businesses could prepare for one way to the other. But in this situation fluctuations might be considered constanstly moving up or down too fast, meaning companies don't have enough time to prepare for the steady fall of the yen.

Maybe the Japanese government, if they haven't decide yet, could provide a supplementary budget just to help businesses and households throught the weak yen period.

Article:

Their warnings have had little impact as market participants reckon there is a slim chance that the Finance Ministry will actually intervene in the currency market.

"It's become clear that verbal interventions don't make any difference, as investors see it as 'all words, no action,'" Kanda at Gaitame.com Research Institute said.

Japan posted the largest trade deficit in seven years in the fiscal year ended March 2022, as a surge in energy prices boosted imports with eight consecutive months of a deficit from August.

Ideas:

The BOJ needs to use its communication tools in a way to keep whomever satisifed, if possible, that its doing all it can at this time to make sure the Japanese economy is sound.

There is only so much a central bank can do or even the government side can do with fiscal strategies. 

For example its not ther BOJ's fault or the Japanese government's fault that global energy prices or raw material prices are constantly increasing.

All the BOJ can do it try to manage the economy and try not to do too much harm. In this situation, because of the weakenesses in the Japan economy, increasing the key rate might actually do more harm than good at this time.

Any time there is a trade deficit, imports are more than exports. And this situation, the value of imports might be more than the value of exports because of the constant increase in global energy prices.

As Japan is more of an export oriented country there is always the concern about trade deficits or trade surpluses. A trade deficit reduces Japan's current account balance, kind of like a contry's bank account. 

But Japan over many years ran trade surpluses meaning there were many years of the yen going into the account. So even though eight months might sound like a lot, when you have many years of a surplus even one year of deficits is not going make that big of an impact on Japan's current account.

Article:

As long as demand for the dollar from importers remains strong trade-wise, attempts by the authorities to arrest the yen's tumble will prove short-lived, analysts say.

"Balance in currency demand has skewered as importers have constantly been buying the dollar, with that need unlikely to end as long as soaring commodity and energy prices don't fall," said Ishizuki.

The BOJ could ask other central banks to step into the market in concerted efforts. Other countries, however, look little interested in the yen's recent rapid depreciation as they are focusing on curbing inflation and mitigating the impact of the Ukraine crisis, analysts say.d

Ideas:

All countries right now are most likely concerned with their own inflation challenges and might not be very interested in intervning in the currency market to help another country at this time.

There might be the possibility of some kind of currency swap in the near future as central banks always talk to each other related to swapping currencies as needed.

There seems to be too many distractions at this time for any country to be concerend with what is happeing in another country's economy.

At one time, for example, the US would sometimes say they weren't going to increase its rate because it might have an effect on other economies globally. 

But maybe at this time the inflation situation and other challenges in the US has not allowed them to think globally but only think domestically about the US economy only at this time.

As long as energy prices and raw material prices continue to increase, importers in Japan are going to continue to buy dollars to protect their businesses.

Article:

With the House of Councillors election scheduled for the summer in Japan, voters are likely to focus on some of the factors that have recently pressured consumer spending, including elevated commodity prices and the yen's rapid depreciation, and how the government plans to mitigate those risks.

"It's not about when the yen might begin to strengthen again," Kanda said. "It's about how far it will fall."

Ideas:

Unfortunately economics and politics can be intertwined meaning anytime there is some kind of election politicians, whether good or bad find ways to say things that they think might help them win elections.

Whether they actually act on what they say is another story all together. But in this situation, it might be a good idea to say what they might do the manage or fix the current situation related to society and economy, and the continued in increase in prices.

Some might say "just let the economy fix itself," meaning let the economy be and it will naturally get back to some kind  of normal or prices will get back to some kind of normal.

That might be happen eventually but how long is it going to take and how many businesses and households have to suffer through the higher prices.

Perhaps its time for some kind of subsidies or some kind of extra budget to be used as way to offset the higher prices. 

The Bank of Japan and the Japanese government need to work together and come up with some strategies that can ease the burden on businesses and households.

Have a nice day and be safe!

Japan Industrial Output:

 Article Source:  https://mainichi.jp/english/articles/20220428/p2g/00m/0bu/026000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in fiscal 2021 expanded at a record 5.8 percent from the previous year after two straight years of setbacks due to the coronavirus pandemic, government data showed Thursday.

In the year through March, the index of production at factories and mines stood at 95.5 against the 2015 base of 100. The rate of increase, following a 9.6 percent plunge in the previous year, was the highest since comparable data became available in fiscal 2014.

The data showed, however, that Japan's industrial output has not recovered to pre-pandemic levels, with the index standing at 99.9 in fiscal 2019.

Ideas:

Japan's industrial output might have increased but it must be remembered just how much it decreased the previous two years.

So even though there was a 5.8 percent increase, its not as much as it probably should have been considering where it was in 2019.

Japan's industrial output might not reach the pre-pandemic level anytime soon with challenges in raw material costs, energy costs, and the continued shortages related to chips and other commodities.

It might take up to a year or more for the index to get back to the 2019 level as there are still many challenges related to inflation, the pandemic, and the Ukraine war situation.

Article:

Production was on a downward trend until last September due to shortages of semiconductors and parts supply disruptions in Southeast Asia due to COVID-19 but has been recovering since, led mainly by a pickup in production machinery output.

The country's output in March climbed 0.3 percent from the previous month, as the impact of the coronavirus pandemic waned, the Ministry of Economy, Trade and Industry said in a preliminary report, following a revised 2.0 percent rise in February.

The ministry retained its basic assessment that industrial production was showing signs of picking up based on the figures in March.

Ideas:

Industrial production might be picking up but its still not where is should be just yet, as there are might be many hidden weaknesses that are going to slow down the pace of production.

All of the challenges that have affected production the past two years are not suddenly going to just disappear, as some of them still there and will remain for awhile longer.

The pandemic has produced a number of new challenges for every economy and Japan is no different. The key is to indentify what the new challeges are and be able to manage them so that production can get back to the 2019 in the near future.

Prodction sometimes runs on a up and down trend, as some quarters prodction is very good and some quarters production is just so so meaning not much change from one quarter to the next, as their are always challenges to production schedules related to shipping, materials, and energy challenges.

Article:

Output in eight sectors including semiconductor manufacturing equipment and other production machinery grew, while declining in seven sectors such as automobiles and related equipment, which dropped 6.0 percent due to the impact of an earthquake that rattled northeastern Japan in the month.

"We will continue to watch for a potential rise in coronavirus infections, parts supply shortages and rising prices, in addition to monitoring the situation in Ukraine," a ministry official told reporters.

Ideas:

Each sector has its own challenges and must be examined closely and not just lump every sector in one lump sum and examine just what the challenges are and what are companies doing to overcome the current challenges that exist.

The auto industry in Japan and globally will continue to have challenges now and in the future as shipping challenges, chip challenges, and energy challenges will continue to affect the auto industry for the time being.

Industrial production is a major component of the Japanese economy but will continue to cause a strain on economic growth until all of the challenges can be overcome in the future.

But how long that takes is the major question that needs to be looked at carefully.

Article:

The index of industrial shipments in the final month of fiscal 2021 rose 0.5 percent to 93.2, marking the first increase in three months, while that of inventories fell 0.6 percent to 100.7.

Based on a poll of manufacturers, the ministry expects output to grow 5.8 percent in April and decline 0.8 percent in May.

Ideas:

An increase in industrial shipments show some signs of improvement meaning there is continued demand for Japanese industrial products. 

The fact that inventories decreased 0.6 percent could be nothing more than a some work related stoppages or production schedule challenges and or it could also be there was an increase in demand and production was not able to keep up with the demand.

An increase of 5.8 percent in April means production is continuing to improve as maybe the current challenges related to industrial production are beginning to decrease some.

The projected decrease in May might no more than the Golden Week holiday period where companies take a break and don't produce was much.

Have a nice day and be safe!

Japan Jobs:

 Article Source:  https://mainichi.jp/english/articles/20220426/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan saw the first improvement in its average job availability ratio in three years in 2021, likely reflecting the gradual economic recovery from the impacts of the coronavirus pandemic, government data showed Tuesday.

The job-to-applicant ratio for the year through March rose 0.06 point to 1.16, according to the Ministry of Health, Labor and Welfare. The ratio means there were 116 job openings for every 100 job seekers.

Ideas:

Many countries would love to have a 116 job openings for every 100 job seekers ratio. But a questions must be asked in what kinds of jobs are being offered? 

Are they low level jobs or reasonable jobs that pay a decent salary for the average worker. Sometimes there are reports of increases in jobs and increaese in overall employment but looking at the real meaning see see that many of the jobs were low level jobs and not really good salary related type jobs.

In reality it might take some time before gets back to any kind of the majore companies from hiring like they did before the pandemic and then of course the main challenge is being able to offer salary increases that workers have been looking for and maybe the current level of inflation may delay any needed salary increases.

Article:

But the figure was still low compared with prepandemic levels, which registered 1.55 in fiscal 2019 before the economy was affected by the emergence of the pandemic.

Separate government data showed the average jobless rate dropped 0.1 percentage point to 2.8 percent in fiscal 2021.

The average number of unemployed people in fiscal 2021 decreased 80,000 from the previous year to 1.91 million and that of people in work grew 40,000 to 67.06 million, the Ministry of Internal Affairs and Communications said.

Ideas:

Even though the jobless rate decreased there still might be a sizeable number of people in society who have given up looking for work. Especially those were are or were in the services sector which was hit the hardest by the pandemic.

For example the tourism sector, which is part of the overall sevices sector, is not even close to getting back to the pre-pandemic level. 

And as international tourists are still not allowed into Japan, its going to take a very long time to get back to the 2019 level of 31 million international tourists that entered Japan that year.

And with the Japanese yen weakening rapidly that is a lot of yen/money that is not coming into Japan which the Japanese economy desperately needs as the Q1 GDP growth was a -0.1 percent. 

Article:

In March alone, the job availability ratio improved to 1.22 from 1.21 in the previous month, climbing for the third consecutive month, the government said.

The seasonally adjusted unemployment rate was 2.6 percent in March, down 0.1 point from the previous month, improving for the second month in a row.

Ideas:

A country's unemployment rate will never reach 0 percent as there are always workers in transition meaning they are in the process of changing jobs. or some have decided to leave the workforce and some might have been looking for jobs for a very long time and have not been able to find a job yet.

As above, as the services sector was hit the hardest and the tourism sector the hardest hit in the services area, jobs in the tourism area may take a very long time to recover and again no international tourists are really allowed to enter Japan.

With 31 million international tourists entering Japan in 2019 that means they had to stay some where, they ate somewhere, they traveled to places somewhere, and they bought many things somewhere. 

So that means there were a lot of jobs related to international tourists at the time that might not come back for a long time until the Japanese government begins to understand that they need to open the economy and let the money flow back in as a Q1 GDP of -0.1 percent is not helping the economy.

Open the flood gates, make it easy to get into Japan and then watch the Japanese economy begin to get back to some kind of reasonable economic growth.

Have a nice day and be safe!

Japan Key Economic Assessment:

 Article Source:  https://mainichi.jp/english/articles/20220421/p2g/00m/0bu/066000c

Article:

TOKYO (Kyodo) -- Japan's government on Thursday upgraded its key economic assessment for the first time in four months, citing a recovery in private consumption, as the effects of the coronavirus pandemic wane.

"The Japanese economy shows movements of picking up," the Cabinet Office said in its monthly report for April, while dropping the expression "some weaknesses are seen" it had used through the previous month.

The recovery has been driven by more spending for traveling and dining out, a government official said, as a COVID-19 quasi-state of emergency, which allows authorities to ask restaurants and bars to close early and stop serving alcohol, was removed across the country in late March.

Ideas:

Private consumption or private spending might have seen a slight increase but most likely it the tread is not going to continue as inflaton is going to squeeze consumer spending even more in the future.

Even if the Japanese government doesn't want to say it, there are still some major weaknesses in the Japanese economy. But of course all governments sometimes want to be as positive as possible.

Any economy that had a Q1 GDP growth of only -0.1 percent is not a very good economy, as weakenesses will continue for the time being.

There might be more spending for traveling and dining out but its nowhere near the pre-pandemic level yet.

Its going to take some time before the Japanease economy gets back to the pre-pandemic level.

Without a solid return of international tourism, the Japanese economy is going to remain below where its potential is.

Article:

But the Cabinet Office cautioned that short-term downside risks stemming from rising raw material prices, fluctuations in financial markets and supply-side constraints amid the war in Ukraine remain.

The office also said attention should be given to how the pandemic unfolds from now on.

By component, its view on private consumption was also upgraded for the first time since December. The monthly report said it recently "shows movements of picking up," compared with its previous expression "pausing for picking up recently."

Ideas:

These risks may not be short-term as this has been somewhat of an on-going problem since the pandemic started.

It just seems since the Ukraine war the inflation challenges has been more in the news lately.

Yes, it is important to see and what how the pandemic situation is going to unfold in the future, and how the Japanease economy is going to more forward related to any after-affects related to the pandemic.

"Showing movements of picking up" might positive in some ways but it must be remembered that consumer spending has never really reached its potential in the Japanese society or Japanese economy.

And the ideas of "pausing for picking up" may come back again as inflation continues to increase prices in many different sectors in the Japanease economy, meaning consumer spending might begin to slow down again or remain sluggish for a while as prices continue to increase.

Article:

The assessment on public investment was upgraded as well as "solid" from "in a weak tone recently, although it is at a high level." It was the first upward revision since July 2020, according to the office.

All other evaluations were kept unchanged, with the report saying corporate profits are "improving as a whole, although some weaknesses remain in non-manufacturers" and exports are "almost flat."

Its view on the world economy was retained for the third straight month, describing it as recovering as fewer countries have been seriously affected by the impact of the pandemic.

Ideas:

Public invesments, related to the Japaneae government, has always been mostly positive as its a major source of government spending in the Japanese government, whether its related to bridges, dams, airports, or other thing to help the economy grow.

Corporate profits might be improving but the employees of said companies probably are not seeing any increase in salaries as was suggested by Prime Minister Kishida back in December of 2021, as a way to get the economy moving and improve consumer spending.

Companies, as has been reported many times over the years, companies are sitting on huge piles of money in the banks and should some of it to improve the morale of their employees and help the economy overall.,

As employees, consumers, feel better about their increased salaries they might save some of it and they might spend some of it in economy.

But the problem now is inflation is going to make what salaries they have now seem even less, so a reason to increase the salaries of company employeess.

But companies of course are worried about inflation too and might use it as means not to increase the salaries of their employess.

Have a nice day and be safe!

Japan's Core Consumer Prices:

 Article Source:  https://mainichi.jp/english/articles/20220422/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices gained 0.8 percent in March, the fastest pace in over two years, in fresh evidence of cost-push inflation accelerated by surging fuel and raw material costs due to the war in Ukraine and a sharp fall in the yen, government data showed Friday.

With the sharpest rise in energy prices in over four decades, the core consumer price index excluding volatile fresh food items marked the seventh straight month of year-on-year increase and the largest growth since January 2020, the Ministry of Internal Affairs and Communications said.

Higher crude oil and other fuel costs lifted the core CPI by 0.1 percent in fiscal 2021 through March, the first rise in two years, the data showed.

Ideas:

Prices most likely are going to increase until the global trend subsides or levels on. But exactly that will happen is the question to be answered.

As Japan is a resource poor country, meaning it needs to import a lot of commodities, Its being hit with triple challenge of global price increases in energy commodoties, global price increases in raw material prices, and the weak yen which forces the prices up even more

Unfortunately this is not the kind of inflation the Bank of Japan needs or wants to reach its goal of 2.0 percent inflation, which is more related to consumer spending inflation.

Supply or producer inflation most likely is going to reduce consumer spending inflation as companies begin to pass on some or most of their cost increases.

Article:

Analysts expect the core CPI, a key indicator of inflation, will further accelerate toward 2 percent, a long elusive goal set by the Bank of Japan, as the effect of sharply lower mobile phone fees will fall out of the inflation data on a year-on-year basis.

Without the mobile fees effect, the headline figure would get a boost of around 1 percent, a ministry official said.

The rising inflationary trend has added pressure on policymakers to ease the pain of households ahead of the House of Councillors election, likely in July. Prime Minister Fumio Kishida is expected to unveil an economic package next week.

Ideas:

CPI might move toward the 2.0 percent that the BOJ wants but is still not a realistic estimate at this time related to overall consumer spending or consumer inflation.

Its more of an indication of suppliers passing their costs onto the next in the supply chain and eventually the final consumer.

If consumer spending was increasing, which means demand is increasing it would be a realisitic reason for the CPI to increase. But in this situation its not consumer spending or consumer demand, but most likely suppliers passing on their costs to the next in the supply chain, which means it will eventually could reach the final consumer.

The mobile phone situation keeps getting brought up. But it was over a year or so ago when the mobile carriers reduced their fees. Its time to consider some other variables related to the CPI increases or decreases.

Unfortunately, these days, the economy is tied to political actions and as such politictians might add a new budget into their plans ahead of the summer elections as way of furthering their cause.

Article:

The yen's rapid depreciation, reflecting the monetary policy divergence between the BOJ and its U.S. and European counterparts, has gradually changed the tone to underscore its negative side, especially its effect of boosting import costs, a headache for resource-poor Japan.

Energy prices jumped 20.8 percent, the largest gain since 1981. Kerosene surged 30.6 percent and gasoline rose 19.4 percent, though the increases were apparently curbed by government subsidies to wholesalers.

Ideas:

Governor Kuroda, in previous articles, mentioned he doesn't see energy prices continuing to increase much longer. That may be true but for now the stress is still their for companies and households.

This may be a once in a decade or several decades situation of high energy costs conversing with the weak yen. But the BOJ has no choice and stay with its present course of its easing monetary policy as the Japanese economy is not in the same economic growth zone as the US and the EU. 

With only a -01. percent GPD growth in Q1 its now where near strong enough to handle any kind of rate increase with the negative effects key rate increaes can cause.

Governemnt subsidies, or government fiscal spending, is a good strategy to try and reduce the stress on wholesalers.

But the problem is energy prices keep increasing which means the subsdidies might not have much of an effect at their present level and as such they need to be increased as energy costs keep increasing. Otherwise, more and more of their costs will be passed along the supply chain.

Article:

BOJ Governor Haruhiko Kuroda has not budged over the need to maintain powerful monetary easing, saying the current bout of commodity inflation will only be transitory. His stance contrasts with the U.S. Federal Reserve that is scrambling to tame inflation, which topped 8 percent in March from a year earlier, with rate hikes.

Japan's so-called core-core CPI excluding both fresh food and energy prices, dropped 0.7 percent for the 12th monthly fall.

Ideas:

Again the US economy and the Japanese economy are two different organic organisms, and a rate hike in Japan might have even more negatives effects as there are many negative variables that can interact with economic activity in the Japanease economy.

The Japanese economy at this time is just not strong enough to absorb any or all of the negative side effects of a rate hike.

Commodity inflation might be a short term situation, but even now, in the short term, it be causing some serious negative effects on some businesses and households.

The core-core CPI might be a good indicator that shows just how fragile the Japanese economy is at this time, if it dropped 0.7 percent for the 12 straight month. 

That is not the sign of a strong economy if the Core CPI keeps decreasing over time.

If there was a rate hike, it might cause the CPI to drop even further as the money supply in the Japanese economy could potentially become tighter which means less money moving through the Japanese economy overall. which means even less economy activity in an already weak economy.

Have a nice day and be safe!