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!