Japan's Weak Yen:

 Article Source: https://mainichi.jp/english/articles/20220525/p2g/00m/0bu/034000c

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TOKYO (AP) -- The Japanese yen has weakened, trading in recent weeks at 20-year lows of 130 yen to the U.S. dollar just when prices of oil and other goods are surging partly due to the war in Ukraine.

The yen's value against the U.S. dollar and other currencies has fallen mainly because interest rates remain ultra-low in Japan but are rising in the U.S. and other countries. So Japanese who have seen prices barely inch up for many years, or even drop due to deflation, are doubly feeling the ripple effects of rising global inflation.

The price of popular Umaibo, or "yummy stick," snack bars recently increased for the first time in 42 years, from 10 yen (8 cents) to 12 yen (9 cents) each.

Ideas:

The value of the yen no doubt is going to continue to drop unless the Bank of Japan finally decides to intervene and increase the rate in order to help relieve the stress on importers and wholesalers.

The Bank of Japan has its own plan as maybe it doesn't feel it need to do exactly what those in the US or the EU are doing.

For example the Bank of Korea has just increased its rate again as a way to keep pace with what is happening in the US.

Whether good or bad, consumers maybe have not had to deal with price increases for a very long time, so maybe they aren't used to increases in prices.

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Popular 100-yen store chains Daiso and Can Do, the Japanese equivalents of American dollar stores, have yet to become 150-yen stores. But they are switching suppliers, mostly in China, where the yen used to buy more.

A cheap yen has historically been welcomed in export-driven Japan, boosting the overseas earnings of its manufacturers when they convert them into yen. Operating profit at Japan's top automaker Toyota Motor Corp. got a hefty 610 billion yen ($4.7 billion) windfall from the favorable exchange rate.

These days, the weaker currency is a mixed blessing.

Ideas:

But it might happen soon that the 100-yen stores have no choice but to increase prices on some or all of their offerings. Maybe they will take the strategy of increasing the prices on some items but not all of their items and maybe even keep some items at below cost or 100 yen as a way to keep customers coming to their stores. 

For example the use of loss-leaders or products sold at below cost might be used if the loss leader product is a popular product and then customers will buy other products, at the normal, 150-yen price now, as they are in the store.

The weak yen has always been a positive for export driven Japanese companies but not its becoming too much of a challenge for importers and wholesalers as its now become too low.

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EARNING LESS

Tran Ha Van isn't at all happy about what's happening with the yen.

For the nearly 10 years she's lived in Japan almost all of her income has been in yen. Every two months, the Vietnamese technology professional sends money home to her parents, a retired electronic engineer and a housewife.

"What I send them has dropped considerably in value," she said.

When Tran bought Vietnamese food recently for the lunar New Year, prices for everything had jumped. A gift of a personal computer for her parents, for instance, cost more on her credit card, she said.

Tran studied Japanese intensively in Vietnam, graduated from a Japanese university, then worked at a major IT services company in sales and operation management.

She plans to start her own business with the yen she has saved up, using her bicultural and bilingual skills to connect Vietnamese businesses, especially in high-tech, with opportunities in Japan.

The price she charges is set in yen and hasn't changed. But the cost of hiring free-lance Vietnamese engineers is now higher in yen, Tran said.

"For me, I tend to send money more from Japan to Vietnam than the other way around, so it's inevitably a bigger minus if the yen falls," she said.

Ideas:

The drop in the yen, dropping too much, has now become a major challenge for anyone who sends money outside of Japan and or again importers who need to bring products into Japan.

So anyone doing any kind of business related to the yen is now a major problem. But what exactly can be done is a major challenge, as it looks like the Bank of Japan is not going to do much.

But what can the Bank of Japan do? If they increase the key rate and bring it somewhat in line with the US rate, will that help the yen or will it help importers or others who depend on the yen.

And how long will it take for the yen to match or be in a position to help Japanese businesses and others.

The Bank of Japan must be thinking that the yen challenge is not to going last very long, and that there are too many other challeneges that a higher key rate might cause.

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GETAWAY HOMES

The news on the weakening yen hasn't been all bad.

Interest is picking up, said Parker J. Allen, who runs a business finding bargain-priced homes in the countryside and suburban Tokyo for foreign buyers wanting a second home or office.

He's only completed a few deals so far, mostly involving executives at top-name American companies who want to live part-time in Japan. He helps bridge the gap between such people and traditional Japanese real estate agencies.

"Most of the time, you're buying it (the house) for free, and you are paying for the land. If that 30-plus-year-old house is in great condition, you are going to get a fantastic deal," he said recently, showing one such home, with an elegant tatami-mat room overlooking a garden with rocks and trees.

Ideas:

Yes, there are always some positives and negatives in any economy or any economic situation. But the Japanese government and the Bank of Japan needs to weigh the positives and negative carefully.

Any economic action will have both positives and negatives and the Bank of Japan needs to decide which is more important or how much of an effect it each going to have on each group in the economy.

It might be good for some wealthy American executives but what about the small Japanese importer who is just trying to keep above water when their costs are increasing and their profit margins are decreasing.

Which is more important? The American excutive or the Japanese importer? Of course some Japanease businesses besides exporters might be seeing some positive effects but how many.

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Such deals include Japan's plentiful vacated homes, called "akiya," which number about 8.5 million nationwide, or 13% of all homes, according to a 2018 government study. Many once were occupied by families whose children moved away. As the parents age and pass on or move to assisted living facilities, the homes often sit abandoned.

The homes often need renovation, said Allen, an American who co-founded the real-estate consultancy Akiya & Inaka two years ago. "Inaka" means "countryside" in Japanese.

Ideas:

Again some businesses might be benefitting from a weak yen, and good or them, but not all businesses are like the one above. 

The Japanese government and the Bank of Japan, like during the pandemic, need to find ways to help those businesses that are not doing so good because of the weak yen. 

This is not the time to just let the economy be as it is and let the markets sort themselves out as there might be too many importers and wholealers and even some large companies such as the 100-yen stores who might not be around at this time next year if the yen continues to weaken.

Yes, some have or are going to increase prices but then you have to deal with unhappy customers, and if they can, will begin to look for alternatives or substitutes because even they can't afford the higher prices.

So it beomes a muliplier effect where one action starts to create momentum in other areas and both the impoters and those along the supply chain all begin to feel challenges of higher prices and the overall economy begins to suffer with a loss of profits, loss of sales, and a loss of consumer spending in the Japanese economy overall.

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But for those with dollars buying the homes in yen, the added perk from the exchange rate buys more and adds up to quite a savings. The advantage likely is more than what Allen charges in his consultancy fee, which is 100,000 yen ($770) for the first three properties referred.

"There are great properties out there that aren't that expensive. I think we are on the cusp of something huge. I think more people are going to realize what great things you can do in the Japanese countryside," said Allen.

Ideas:

So yes, again there are always going to be those who can benefit from some economic action such as weak yen, but in the above case its the rare situation. Yes Toyota and others might be doing very good, but they too might have supplier challenges with the yen too, but most likely their profits from the weak yen might be enough to overcome their supplier challenges meaning hefty profts.

An economy is never one way or another, as an economy is very complex meaning billions of billions of economic actions taking place everyday, and they are never all positive or all negative.

But that is the nature of a market economy. Next to a market economy, that is functioning somewhat corrrectly what else is there these days. Except for maybe NK there are few if any centralized planned economies and we all know the history of how those turned out.

And even NK is trying to bring some market economy ideas into its country, as they see what China has been able to do or what Veitnam or Laos has been able to do.

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GODZILLA INVESTMENT

The yen's eroding worth is attracting people to new forms of investment in a nation notorious for meticulously saving.

Instead of stashing all of their savings in yen in a low-yield bank account, or keeping it in cash, some are buying NFTs, or non-fungible tokens, which are created using the same technology as cryptocurrency.

Line, a service of South Korean internet company Naver Corp., has begun selling various NFTs, like those by popular manga and musical artists. In the lineup is an NFT of Godzilla versus Hedorah, a monster that looks like a gooey mop, a symbol of industrial pollution and contamination.

Line's offering targets core fans of the content, not investors. But some Godzilla offerings, which initially sold for 5,500 yen ($42) each, have already sold out and are soaring in price.

Ideas:

Investors need to be very cautious as there have been many reports in South Korea about tokens and other currency investors going bankrupt as the markets are not every stabel at the moment. 

Some article talk about how many young investors have lost everything because the currency markets related to tokens or other areas were not safe or stable and had a lot of volatilaity and millions of South Korean won was lost in the markets.

So while they might seem like a long-term investment or not much of gamble, these new markets are still too much of a gamble.

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LURE FOR TOURISTS

The cheap yen normally would draw foreign tourists eager to take advantage of stronger spending power.

But Japan has kept its borders basically shut to foreign tourists during the pandemic. Once the country reopens, the economy could get a lift from the weak yen. In 2019, before the pandemic, 32 million people visited from overseas.

The government soon will let small numbers of foreign tourists visit as "an experiment." Only visitors from the U.S., Thailand, Singapore and Australia will be welcome at first, and they must have a special visa, be triple-vaccinated and stick to specific schedules.

Ideas:

As has been noticed or reported the group tourist situation doesn't seem to be working out too well.

There are some or many tour companies that decided not to participate in the program.

And then those in tour groups need to actually get a visa for the tour. Before you just showed up at the airport with your passport and all was OK. 

And of course all of the pandemic measures are going to turn off any potential tourists from going to Japan.

For those who have traveled to Japan before they don't want to go to Japan on a group tour. They want to do where they want and do what they want and they surely don't want to be led around to some place they don't care about.

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Kaori Inoue, who works in international promotion at the Hokkaido Tourism Organization, said she hopes to start inviting travel agency officials from abroad to drum up business. She is waiting for restrictions to ease further, and for more countries.

"Everything rests with the government. Once the changes kick in, the tourists are going to arrive in droves," Inoue said.

Ideas:

The Japanese economy needs to just open up, if it can, and let the 32 million international tourists back into Japan and spend all they want and then the Japanese economy will begin to see some more benefits of the weak yen and not just the benefits of what the exporters see.

But at this point it might be too late. As travel plans have to be made, airline reservations and hotels need to be found.

And then there is the challenges of airlines ans many are having their own problems with flights.

And for many tourists, before the pandemic, they had visa free travel. Japan needs to re-instate visa free travel again to make it easy for travelers to go to Japan.

It might not be until the fall or even the winter before Japan actualy gets its act together related to international tourism again.

Have a nice day and be safe!

Possible Japan Economy Rebound:

 Article Source: https://mainichi.jp/english/articles/20220520/p2g/00m/0bu/069000c

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TOKYO (Kyodo) -- Japan's economy is likely to be on a growth track from the current quarter, but analysts say surging commodity prices due to Russia's war in Ukraine will weigh on private consumption and become a headwind to its recovery from the coronavirus pandemic fallout.

After all COVID-19 curb measures to contain the surge of infections caused by the Omicron variant were lifted in late March, many analysts expect a strong increase in gross domestic product in the April to June quarter led by the services sector, following an annualized real 1.0 percent decline in the January to March period.

Ideas:

Private consumption or consumer spending has always been a challenge in Japan. Its only about half of Japan's GDP while in other advanced economies its around 60 percent of GDP.

Then add in increased inflation and also the lack of wage increases its looks like consumer spending is not going to help much at the time being.

Yes, the end or somewhat of an end in the pandemic situation might help some but its not going to be enough to push the economy forward.

Inflation along with the weak Japanese yen might be enough to stall the economy at the present time.

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Annualized real GDP in the first quarter came to 537.92 trillion yen ($4.2 trillion), still lower than the October to December quarter of 2019, the last pre-pandemic quarter when it was 541.81 trillion yen, according to preliminary data released by the Cabinet Office on Wednesday.

The GDP growth forecasts by 36 economists averaged an annualized 5.18 percent expansion for the second quarter of 2022, and they forecast that growth will gradually lose momentum in the following quarters to 3.11 percent, 2.04 percent and 1.71 percent.

For the whole of fiscal 2022 from April, growth of 2.37 percent is expected, according to a poll by the Japan Center for Economic Research.

Ideas:

If the Japanese economy does see an annualized growth of 5.18 is very good or even its only 3.11 percent its still very good. But it was be remembered just how bad the Japanese economy has been in 2020 and most of 2021. So those percents are really not that much yet.

If you had a very good 2020 and 2021 and then you see those numbers then we could say the economy really grew, but what the numbers are just saying that the economy is improved or somewhat improved from a not so good two years.

At the same time, numbers don't tell the whole story. The real story are small businesses and houesholds and what are they thinking or feeling right now with inflation increasing and no wage increases. 

Do they really care about 5.18 or 3.11? They care about their lives and their small busineses in the face of increased inflation.

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But many analysts including Yoshiki Shinke, senior executive economist at the Dai-ichi Life Research Institute, warn of being too optimistic about the outlook as the impact of the war that started on Feb. 24 will start to manifest in coming quarterly data.

"Price hikes in daily necessities including food will dampen consumer sentiment and weigh on private spending," Shinke said. "Once an expected rebound in the April-June quarter runs its course, the impact of rising prices will be easier to feel."

Japan's core consumer price index already gained 0.8 percent in March from a year earlier, the fastest pace in over two years, due to surging fuel and raw material costs.

Ideas:

Yes, once the euphoria of the pandemic controls being lifted has run its course and there is a small increase in spending, reality will set in with increases in energy prices, supermarket prices, restuarant prices, household energy prices, and gasoline prices begin to dominate, consumer spending will probably see a decrease as consumers and businesses begin to cut back as much as possible.

Along the way busineses, which have usually been reluctant to increase prices will begin to see they have no choice if they want to survive or want to maintain their current profit margins and they will begin to pass on their costs to the next in the supply chain, which means eventually the final consumer.

Unless the government comes up with some kind of subsidy for households and or for businesses as a stimulus or can find ways to reduce energy and inflation costs, there might not be a significant surge in consumer spending this summer.

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For April, analysts expect the core CPI to further accelerate toward 2 percent, a long-elusive goal set by the Bank of Japan.

To help ease the pain of high prices, the Japanese government has crafted a 6.2 trillion yen emergency economic package, which includes subsidies to oil wholesalers to bring down retail gasoline prices.

But even with the relief measure for fuel prices, average Japanese households may face an extra expense of 60,000 yen ($465) in 2022, if the Japanese yen remains at a 20-year-low level against the U.S. dollar and fuel prices stay elevated, according to an estimate by Mizuho Research & Technologies Ltd.

Ideas:

The Bank of Japan's targeted goal of 2 percent inflation no where near in sight as it has always been related to consumer demand and consumer spending and not supply inflation which is what the CPI is all about now, as suppliers increase their price as their raw material costs keep increasing.

Consumer demand has not risen to 2 percent level yet, where supplier and other raise their prices based on increase consumer spending and or increase consumer demand. That is not happening that this time.

The subsidies for oil wholesalers is very good but it needs to be relative, meaning as energy prices continue to increase the subsidy should be increased to make sure oil wholesalers are not forced to pass on their increased costs to the next in the supply chain.

So as households continue to see increases in energy prices and other things they will begin to crowd out spending in many areas and as such consumer spending might be even less in the coming quarters.

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For resource-poor Japan, recent rapid depreciation of the yen has partly contributed to price inflation. Saisuke Sakai, senior economist at Mizuho, said about a quarter of the estimated additional cost is attributable to the weaker yen.

"There are no major factors that will change the dollar-yen rate situation for the time being," Sakai said. "Increasing import costs will add burdens for companies and households."

The calculation was based on the dollar being traded at an annual average of 130 yen and the West Texas Intermediate crude oil price moving at around $108 per barrel.

Ideas:

Japanese consumers seem to be very price sensitive so any kind of price increase. So even though the weak yen is attributed to about a quarter of the inflation increase it might be too much for some, especially those who are on limited or fixed incomes or who have a lot of debt.

Unfortunately, it is what it is meaning Japan being a resource-poor economy is something is always going to be there and the weak yen of course just makes it worse.

If it was just inflation then maybe it wouldn't be quite as bad but add in the weak yen makes inflation even worse or makes the already high prices even higher for some or many.

Crude oil at $108 per barrel is very high and it migh not trend down anytime soon or in the near future.

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The yen has weakened as the BOJ has kept interest rates at near zero as part of its accommodative monetary policy, while the U.S. Federal Reserve is expected to keep raising rates to tame inflation.

Recovery in consumption may also be slowed if Prime Minister Fumio Kishida's government takes anti-virus measures amid a future surge in COVID-19 cases, said Taro Saito, executive research fellow at the NLI Research Institute.

"Private consumption will not recover sustainably" if economic activities are repeatedly restricted, Saito said.

Ideas:

Kuroda and the Bank of Japan has its own ideas on how to manage the economy as does the US Federal Reserve. Which strategy is correct is probably not the best question but what is going to work for different situations or different economies is maybe the better question as we will see how each strategy evolves in the coming months.

And even then there is no real economic experiment other than the natural experiement of just watching and seeing what happens in each economy. You can run all the computer program experiments, with all the numbers you want. but in reality it comes down to how consumers and businesses respond to different situation in their daily lives.

Consumer spending always seems to be the key in any economy. And related who responds to how consumers spending or activity is less or more as to what will happen to an economy.

For example, if consumer spending sees a significant increase related businesses might begin to spend more, invest more, and maybe even increase wages of their employess. But if the opposite is true, then businesses might do the opposite.

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While other major economies have moved on to a "living with the coronavirus" phase, Japan has not. That has left the Japanese economy lagging behind those of the United States and European countries, the economist said.

Fallout from Japan's economic sanctions on Russia over the war in Ukraine is also something to be watched closely, Saito said, particularly whether Japan can secure energy supply, as Kishida has said Japan will "in principle" ban Russian oil imports.

"Since energy supplies would be lower, though to what extent is yet unclear, the economy may be disrupted," he said.

Ideas:

Its kind of a mystery as to why Japan also has not moved on and moved into a "living with the virus" phase. 

Maybe it has to do with the upcoming elections. Maybe it has to do with the state of the medical system in Japan. Maybe it has to do with large number of elderly people in the country. Maybe it has to do with China and its continued virus situation. Or maybe its a combination of things or something that is not being said.

Whatever it is, the Japanease economy is missing a golden opportunity, with the weak yen, to get its economy back on track to the pre-pandemic level. 

Over 31 million international tourists went to Japan in 2019, before the pandemic, which resulted in a lot of money flowing into the economy. if there is ever a time to counteract the negative effects of inflation and move out of the pademic era this summer would have been the perfect time.

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That could be a repeat of the power crunch Japan experienced in March, when some thermal power plants went offline due to an earthquake that hit Japan's northeast. Some manufacturers halted operations at factories to help save electricity.

In 2021, Russian oil accounted for 3.7 percent of Japan's total crude oil imports, while 8.7 percent of the total liquefied natural gas imports were from the resource-rich country, according to government data.

Ideas:

Whenever there are potential supply shortages there are going to be increases in prices. So the Russia situation is not going to help in lowering energy prices in Japan.

As the summer heat continues to reach record highs energy needs or going to increase which of course there are going to be even more energy challenged situations.

But Japan is not the only country is this situation as record summer heat temperatures are going to challenge many countries and then add in the already high energy prices and the Ukraine situation, energy prices, at least for the summer are not going to see any trending down anytime soon.'

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On the likelihood of Japan tightening its sanctions by phasing out or banning LNG imports from Russia, Deputy Chief Cabinet Secretary Seiji Kihara has said the government will "think about how to deal with it when it becomes necessary."

"There are plenty of concerns," said Shinke. "There is a fair chance of the GDP growth for fiscal 2022 falling below 2 percent."

Ideas:

If possible, countries should always have a large number of suppliers to rely on instead of just one or two suppliers as we see today anything can happen.

The same can be said for those companies that rely on one or two semiconductor chip supplers only when the chip shortage might cause to shut down production for a lack of chips.

The same for energy needs of countries Have a number of suppliers avaiable for whatever happens in the future.

GDP economice growth for fiscal 2022 doesn't look as promising as expected at this time. But the situation could be much different in Q3 or Q4 as things can change quickly sometimes.

Have a nice day and be safe!

japan's Rising Prices:

 Article Source: https://mainichi.jp/english/articles/20220521/p2a/00m/0bu/023000c

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Rising raw material costs coupled with the yen's historic drop to a two-decade low against the U.S. dollar have driven up prices in Japan. The Mainichi Shimbun interviewed a discount store and cafe that have been hit hard by the sudden shift.

Japan's consumer price index (CPI) for April rose by 2.1% from the previous year, the Ministry of Internal Affairs and Communications announced May 20. This marks the largest increase in over 13 years since September 2008, excluding effects of the consumption tax hike, and consumers' daily lives are being impacted.

During Japan's prolonged period of deflation, 100-yen stores -- equivalent to dollar stores -- expanded quickly. They have consistently posted high sales figures and their store numbers have continued to grow over the past decade, and the market is about to reach 1 trillion yen, or roughly $7.82 billion. But the business model is facing a major turning point.

Ideas:

Because of the yen and because of the global increase in raw material costs, costs in the Japan are going to continue to increase. 

For some it good be a challenge but for some maybe not. Most likely many small businesses its a major challenge for them, as they are always very reluctant to pass on thier costs to the next in the supply chain, which could be the final consumer.

The 100-yen stores are not going to have decide what do to. Do they keep some of their offering at 100 yen or do they just across the board increase prices to cover their costs.

I don't think the business model has to change that much but most likely they need to be more strategic and decide which products or offereings to they keep at a low price and which products to increase.

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"It's the toughest situation we've ever been in. At this rate, the delivery of stock for our stores will come to a stop. If things go on like this for more than a year, the store's continued existence will be in danger." So said Takeshi Miyagi, 54, senior managing director of Initial One Hundred, which manages nine "The 100 Stores" discount shops in Tokyo.

Of the some 10,000 products handled at the shops, 90% are imported. As import costs rise amid the spike in raw material prices and the weak yen, the only way to sell products at 100 yen is to buy stock at lower prices. However, Miyagi said that distributors say they, too, are in a pinch and can't cut prices any further.

Lately, the company has been unable to procure goods at 100 yen, and has increased its stock of items costing some hundred yen, including an A4-size plastic case that was raised from 100 yen to 200 yen. Soil for gardening, which sells well in the spring, is procured from China. As it has many fans, the company has tried to keep it at 100 yen. But the shops' profit on the soil has been squeezed to nearly nothing, and they will likely need to raise prices soon.

Ideas:

The yen shops are definetely being challenged now. But this is a situation that maybe the government should step in, like during the pandemic and help the 100-yen shops with some kind of subsidies to help them get through the situation.

There are probably too many stores, too many employees that are are going to have major challenges and ultimately could hurt the economy overall if this discount store sector become a crisis situation.

Again another option might be to increase the prices on some of the products a select group but not all of the products a store might sell. And of course put up signs that apologize for the challenges it might bring to the customers and explain we hope this is just a temporary situation.

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Major 100-yen shop operators have also given up on selling all products at 100 yen, raising prices for more goods. One distributor for a major operator said that "shops and makers are scrambling for profit, which was slim in the first place."

100-yen shops sell a rich variety of cheap daily items, from food and tableware to stationery and toys, and so are both very popular and a necessity for consumers. However, one industry source said that more shops have been cutting products as many of them are no longer profitable when considering the wholesale price.

Meanwhile, inflation has also affected a cafe in Gifu Prefecture, which boasts one of Japan's highest coffee shop counts per 1,000 people. Many locals eat breakfast at such cafes, which offer "morning" menus of toast, salad and other food with an order of coffee.

Ideas:

In the US, for example, the dollar stores don't sell all of their product offerings as one dollar so maybe the Japanese 100-yen stores can do the same, but at the same time keep the model of the store on the main or popular items at 100 yen.

And yes, they can cut or reduce the products that are just not profitable anymore. Another way to do it is to have some items as loss-leaders, meaning sell them at below cost as a way to keep customers coming to the store. But of course stores will need to be very selective in how they do it.

There might be many ways for store to continue as a 100-yen store by finding strategies to keep the focus on the 100-yen idea but increase the prices on some products too.

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Yukihiko Kojima, 75, is the owner of Saiwai, a 112-year-old cafe in the prefectural city of Tajimi. Though its prices have remained the same for 24 years -- even after 2019's consumption tax hike -- the shop had no choice but to raise the price of a cup of coffee from 400 yen to 450 yen.

The international price of coffee beans is high due to bad weather in major producer Brazil, and the weak yen has made matters worse. The coffee shop's signature handmade doughnuts have also been affected by climbing flour and cooking oil prices.

One 71-year-old regular said, "The recent price rises are tough for those of us living on a pension, but this place has endured (by keeping prices the same) for a long time. This time, it just can't be helped." Many regulars continue to visit the cafe, which makes Kojima feel even more sorry for his customers.

Ideas:

The coffee shop seems to have a lot of loyal customers that might be willing to accept the increase in prices. But of course not everyone is going to be so generous. 

And for some an increase from 400 to 450 might be a lot and some some they might not even notice or even care. 

But the coffee shop, like many other places probably have no choice and most likely they waited for as long as they could and then eventually and had to increase prices.

Hopefully like during the pandemic the Japanese government can find a way to help small shops and the 100-yen shops with the increase in material costs. 

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In a very unusual move, the prefecture's coffee shop union called on member establishments not to hesitate to raise prices. The union explained, "By keeping prices the same, more shops may ultimately be forced to close down." The region's coffee shop breakfast culture is wavering amid the nationwide price increases.

Ideas:

Yes, shops and stores might not have a choice and will need to increase prices to survive. Unfortunately there might be some shops that won't make it like in the pandemic. 

But again the government should find ways to help as many stores and shops as possible with subsidies or whatever as a way to keep them going.

This is not the time to just let the market be or let the market run its course. Like in the pandemic society and small businesses are the first to be hit hard and they should be the first to be helped as they are the back-bone of the economy and society.

The Japanese government is not going to run out of money if can somehow find a way to provide enough subsidies for every small business such as the coffee shop to make it through the inflation pandemic.

Have a nice day and be safe!

Japan Inflation:

 Article Source:   https://mainichi.jp/english/articles/20220520/p2g/00m/0bu/024000c

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TOKYO (Kyodo) -- Japan's consumer inflation in April accelerated 2.1 percent from a year earlier, as higher commodity prices and a weak yen helped lift the key figure to a seven-year high and above the Bank of Japan's 2 percent target for the first time since 2015, government data showed Friday.

The steep rise in the core consumer price index came as the effect of sharply lower mobile communication fees -- a big drag for months -- began to fall out of the inflation data. The figure compared with a 0.8 percent increase in March and marked eight straight months of gain.

The war in Ukraine has sent prices of energy, including crude oil, as well as raw materials higher, adding inflationary pressures to resource-poor Japan. While economists say the commodity-led inflation is likely to continue for months, the BOJ is expected to see the rise as temporary and persist with monetary easing.

Ideas:

Japan's inflation rate of 2.1 percent is much lower than most countries. But it must be remembered that the 2.1 percent is not real consumer inflation or consumer demand or consumer spending inflation but supplier cost inflation which is very different.

So we really can't say, yet, that the Bank of Japan has reached its target goal of 2 percent inflation as it really has nothing to with consumer spending, which is really what the BOJ has wanted and not supplier cost inflation.

Lower mobile fees are both a positive and a negative. For consumers of course its very much a positive and for mobile carriers it can be negative. Mobile carriers, like any business, will find ways to maintain their profit margins by increasing prices releated to other products or services. 

The Ukraine war only accelerated the increase in commodity-led inflation as it has been slowly increasing during the pandemic and now is somewhat out of control globally.

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The core CPI, excluding volatile fresh food items, was last above 2 percent in March 2015, in the aftermath of a consumption tax hike to 8 percent from 5 percent, according to the Ministry of Internal Affairs and Communications.

Apart from the tax hike impact, September 2008 was the last time the closely watched gauge of inflation was above 2 percent, meaning that it is the first time that the threshold has been crossed without a tax effect since the BOJ launched powerful monetary easing under its current governor, who took the post in 2013.

"The headline figure is above the BOJ's 2 percent target but it doesn't mean that its goal has been achieved in a real sense. The economy is facing downside risks, with higher commodity prices hurting consumer spending," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute.

Ideas:

The core CPI is something to be concrned or think about, maybe for economists, but for the average consumer it might not mean much. What matters to them is their daily/weekly spending that is needed and how much.

So some products they might buy have risen some, and some might not at all, and then some maybe a lot is what matters to the average family or household. The only numbers they care about is the price they see on products in the supermarkets.

But to be fair, consumers have gotten used to lower prices on things compared to some consumers globally. So now, because of the increase in supplier prices now being passed on to others in the supply chain and then the final consumer, consumer maybe are a little worried about how much more prices are going to increase.

In 2014 when the tax increase went from 5 to 8 percent and then in 2019 when the tax increase went from 8 to 10 percent consumers were preparing ahead of time with a lot of  consumer spending before the tax increases and then for a short time consumer spending decreased a while after the tax increase. But then, as usual, consumers got used to the extra price increases and went back to spending as normal, or normal for Japan.

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Energy prices surged 19.1 percent, with gasoline, kerosene, city gas and electricity bills all marking double-digit jumps. Gasoline was up 15.7 percent and kerosene 26.1 percent, though government subsidies to wholesalers to bring down retail prices helped ease the upward pressure.

Mobile communication fees were down 22.5 percent in April but the pace of decline slowed from 52.7 percent a month earlier.

"The basic price trend is the same as before. But what is striking this time is that food prices are trending higher amid supply concerns related to the situation in Ukraine," Kodama said, comparing the current situation to the last time the core CPI was above 2 percent in 2008.

Ideas:

Energy prices keep increasing but are the government subsidies to wholesalers enough to keep them from continuing to pass on their costs to the next in the supply chain. There should maybe be some kind of sliding scale, meaning as wholesale prices continue to increase the government should continue to increase the subsidies to help the economy.

The Japanese economy, for the most part, might be seeing the pandemic ending but we have another crisis related to inflation. As energy prices continue to increase the Japanese government should continue to help whomever with subidies and or more government spending.

If companies/businesses are seeing increases in their costs, they may or may not pass on their costs to the next in the supply chain as they are often reluctant to pass on their costs. 

So now their profit margins are decreasing which means they have little or no room for salary increases for their employees and or no room for capital spending projects or investments in the future.

And so now company employees, who are consumers, have less to use or spend in the economy as they are being squeezed by increasing gasoline prices, increasing supermarket prices, and increasing home energy prices. 

As a result there will now be even less consumer spending in the Japanese economy, and the BOJ's target of 2 percent consumer inflation is not going to be reached anytime soon.

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Even without perishables, food prices gained 2.6 percent in April, the fastest pace since 2015, with wheat, meat, coffee beans and cooking oil among those affected. Of the 176 items surveyed, 127 saw higher prices, the ministry said.

With a core CPI reading above 2 percent widely expected, the BOJ shot down speculation it would tweak its monetary policy. Governor Haruhiko Kuroda has said the central bank is aiming for sustainable inflation that is accompanied by strong wage growth, not inflation led by temporary increases in commodity prices.

The price gains come at a delicate time for Japan where consumers are not fully confident of an economic recovery from COVID-19, and politicians are wary of price-sensitive voters ahead of the House of Councillors election in July.

Ideas:

What the BOJ wants and what is happening is very much different. The CPI is not an accurate picture of consumer spending which is what the BOJ wants to see. Its only a picture of supplier prices increasing, and in this case suppliers passing on their costs becasue they need to maintain their profit margins and can't afford to absorb all of their price increases.

In normal times, if consumer spending was significantly increasing then suppliers might increase their prices as demand for their prices are increasing. But in this case that is not what is happening. Consumer demand is not increasing but supplier prices are increasing.

With all due respect to Kuroda and what he wants to do and what he expects, it doesn't seem likely that companies are going to increase wages anytime soon or not enough companies are not going to increase wages to the point they have an impact on consumer spending or inflation overall.

But Kuroda and the BOJ is correct, at this time, to maintain its current policy are there are still too many negatives in the Japaneae economy and society from the pademic and not the inflation situation which is making the situation even worse.

If the Japanese government and the BOJ were really concerned with getting the economy back to normal and seeing inflation at the 2 percent level, meaning consumer demand inflation, they really need to open the floodgates and let regular tourists into the country and let them go where they want and spend.

The tour-group situation, might be good for maintaining control over what is left of the pandemic but its not going to have a signifcant effect on the the Japanese economy. 

Over 31 million tourists came to Japan in 2019 which meant a significant amount of money moving through the country. 

The normal Japanese consumer is not going to spend enough to significantly help the economy, with all the cost restraints they have now.

With the weak yen, international tourists can come in and make up the difference and provide the needed spark the Japanese economy needs at this time.

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The rapid depreciation of the yen, which has fallen to 20-year lows against the U.S. dollar, has proven a headache for Japan as it has boosted import costs.

"Raw material prices had already been rising (helped by a global economic recovery and supply shortages) and the weaker yen magnified the impact," a ministry official said.

The BOJ's strong commitment to ultraeasy monetary policy contrasts with its U.S. and European counterparts that are dialing back stimulus to rein in sharp gains in prices.

The so-called core-core CPI, excluding both energy and fresh food prices, gained 0.8 percent, marking the first rise since July 2020.

Ideas:

The weak yen might be a challenge for parts of the economy but its also a positive for exporters whose prices are higher globally. which brings more money into the Japan current account.

The Japanease government can always use price controls, as needed, to keep prices low on needed daily products, such as bread, milk, eggs, meat and so on and they provide subsidies to importers and wholesalers to help them keep their profit margins at a normal level.

The BOJ is correct in what its doing as there are too many negative variables in the Japanese economy that would be effected by a rate hike increase.

For example those who have exisiting loans would now have pay even more. A small business that needs a loan because their supply costs are getting too high would not have to pay more. A family who needs a houshold loan would now have to pay more and so on.

A rate increase would have a multipier effect in causing many more contraints on the Japaneae economy at this time.

Have a nice day and be safe!