Bank of Japan and Recovery:

 Article Source:  https://mainichi.jp/english/articles/20220411/p2g/00m/0bu/027000c

Article:

TOKYO (Kyodo) -- Japan's economy still shows some weakness due to the COVID-19 pandemic, but it will continue to recover despite a blow from surging commodity prices, Bank of Japan Governor Haruhiko Kuroda said Monday.

Higher energy prices and raw material costs will accelerate Japan's inflation in the coming months, with the core consumer price index excluding volatile fresh food items likely to rise "clearly," Kuroda told a meeting of the bank's branch managers.

But he cautioned that "extremely high uncertainties" remain over how the crisis in Ukraine will impact commodity prices and the Japanese economy, the governor said.

Ideas:

The type of inflation that is hitting most if not all countries is not consumer inflation or business spending inflation but supplier cost inflation, which of course is not the supplier fault.

As Japan is very resource poor country it has to import a lot of it raw materials and energy which globally has been increasing mostly since the pademic started.

The Ukraine war situation seemed to hightlight the material costs and shortages along with the Russian oil situatoin.

Commodities such as grains, cooking oil and then gas and oil supplies are all challeging at this time, not just in Japan but globally too.

Article:

"Japan's economy has picked up as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19," Kuroda said.

"As downward pressure on service consumption and the impact of supply shortages diminish, a pickup in overseas demand, accommodative monetary policy, and the government's economic stimulus will likely help the Japanese economy recover despite being affected by rising commodity prices," he added.

Currently, Japan does not have any COVID-19 curbs in place after lifting quasi-emergencies last month but Prime Minister Fumio Kishida has warned of a rebound in infections.

Ideas:

Japan's economy might be picking up some but it has a long way to go to get back to the pre-pandemic level. 

The services sector was the hardest hit sector related to the pandemic and it will probably be the last sector to fully recover as it involves people to people contact.

But it might not fully recover to the pre-pandemic level until the international tourism sector is fully open whenver that might be.

Its hard to replace 31 million international tourists that came to Japan in 2019 with a smaller domestic tourism base.

Any stimulus is going to help but usually a stimulus is a short-term fix and then things are back to they way they were before the stimulus.

The Japanese economy needs sustained long term growth and wherther some like or not, the international tourism sector is the variable that needs to be added to the mix.

A few tour groups here or there are not going to move the economy forward.

Article:

Soaring fuel and commodity prices since Russia's invasion of Ukraine that began late February have cast a shadow over resource-scarce Japan.

Corporate sentiment, both among big manufacturers and nonmanufacturers, worsened for the first time in seven quarters in the most recent Tankan survey for March.

The yen's rapid depreciation, especially against the U.S. dollar, has inflated import costs, prompting some corporate executives to warn of its negative impact on the economy.

Ideas:

All of the three above factors, commodity prices, corporate sentiment, and the weak yen are going to continue to slow down the Japanease economy. 

Japan needs a game changer to offset the variables. What that game changer is and what maybe the Japanese government doesn't want to use just yet, it to open the flood gates fully on international tourism and let the money flow into the country.

There is a lot of pent-up demand meaning tourists have money to spend and with a weak yen, that can only mean internationa tourists are more than willing to come to Japan and spend a lot if just given a chance.

Think of 31 million toursist in 2019 and how much they spent in the Japanese economy.

Eliminate as many restrictions as needed and let the tourists in. Get back to the visa free status as before the pandemic and the three variable slowing down the Japanese economy will not be that big a challenge as the big spending international tourist might be able to offest some of the weaknesses in the eonomy.

Article:

The recent depreciation of the yen comes amid the prospect of diverging policy paths for the BOJ, still far from its 2 percent inflation target, and the U.S. Federal Reserve, which has entered a rate hike cycle to fight inflation that neared 8 percent in February.

Kuroda has said commodity inflation is unlikely to prompt the BOJ to change its monetary policy because it will not last long. But he told parliament that the yen's fall has been "somewhat rapid," in his strongest yet warning since it tumbled to an over six-year low in March.

Ideas:

The BOJ is correct in not following the lead of the US Federal Reserve as every economy has its own unique challenges and what might work in the US might not work in Japan.

The BOJ should not give in to US pressure to increase its key rate now or in the future.

Again the inflation now in Japan is not the kind of inflation the BOJ wants or needs. The inflation now is supplier cost inflation and not business spending or consumer spending type inflation which the BOJ needs and wants.

The ideas that commodity inflation will not last long might be true but its not easy to be able to predict exactly when it will end. 

It might peak and then begin a gradual decline but most likely not a rapide decrease which could destablize commodity markets globally.

And then the yen's sudden fall most likely is related to the imbalance between the yen and the dollar and most likely shouldn't be tampered with at this time.

Article:

The core CPI in Japan rose 0.6 percent in February as higher fuel costs outweighed the drag from sharply lower mobile communication fees.

The BOJ is scheduled to release its quarterly "Sakura" report on regional economies later in the day.

Ideas:

Isn't about time the BOJ stop talking about the lower mobile fees as its been almost a year or more since th mobile companies lowered their fees.

The CPI is just a number, just a measurement. Does the average consumer or even think about it. Or is what happens at the supermarkets and the changes in prices more important ot the average consumer.

Yes its important to understand what the CPI is and what it means but for the average consumer what happens at his or her supermarket has more meaning to them.

Have  a nice day and be safe!