Japan Industrial Output;

 Article Source: https://mainichi.jp/english/articles/20220630/p2g/00m/0bu/023000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in May marked the steepest fall in two years, down 7.2 percent from the previous month, as the auto industry was hit by parts shortages due to a COVID-19 lockdown in Shanghai, government data showed Thursday.

The seasonally adjusted index of production at factories and mines stood at 88.3 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said. The decline followed a decrease of 1.5 percent in April.

With the sharpest fall since May 2020, the ministry also downgraded its basic assessment of industrial production for the second straight month to "weakening," compared with "was pausing" in April.

Ideas:

Industrial production might not get back to the pre-pandemic level for some time as parts shortages and shipping delays might be here for a while.

It's easy to say companies should have planned ahead but the last two or three yeas as been unprecedented in history and no company could have predicted this.

Weakening might be a very good assessment as the China situation might be hiting many companies in Japan and globally.

Article:

"Many Japanese companies said they were affected more severely by the lockdown in Shanghai in May than in April," said a ministry official.

The ministry assumed logistics were disrupted for a full month in May, although the early part of April is believed to have escaped the lockdown's impact as some parts for manufacturers had already been shipped out when the measure was put in place in the Chinese commercial hub in late March.

Of the 15 industries covered by the survey, production in 13 declined. Automobile output dropped 8.0 percent from the previous month, including a 33.2 percent plunge in truck manufacturing, according to the data.

Ideas:

Its easy to say but maybe companies, if possible, should expand their supply chains related to the parts they need and not just rely on a few companies.

This could be a lesson to be learned that companies need to expand their supply chains to include many parts suppliers and don't jsut rely on a few companies if possible.

This should be an opportunity for those parts suppliers who usuually don't supply parts to some or many Japanease companies to find ways to become  part of these manufacturing company's supply chains.

It should be an opportunity, again, to many of the small parts companies to try and get into these larger supply chains and take advantage of the Shanghai situation.

Article:

Output of electronic components, such as lithium-ion batteries including those for automobiles, plummeted 11.3 percent and that of construction and production machinery fell 5.1 percent, the data showed.

Meanwhile, output of organic and inorganic chemical compounds rose 3.9 percent, and that of petroleum and coal products, such as diesel fuel and jet fuel, grew 8.9 percent.

The index of industrial shipments declined 4.3 percent to 89.0, while that of inventories was down 0.1 percent at 98.5 for the third straight month of decline.f

Ideas:

Just how much does a 11.3 percent decrease affect companies. Do most or all companies now work on the just in time appoach and only have a limited supply at all times.

Or do comapnies stock-pile the important parts they need just in caase situations like the Shanghai situation doesn't affect their producton levels.

So as we see, an economy is very complex and what might be a challenge for some companies doesn't affect other companies or industries and they seem to be fine.

Article:

"We will continue to closely watch the effects of the development of coronavirus infections for domestic and overseas economies, shortages of parts, rising prices and the situation of Ukraine," the official said.

Based on a poll of manufacturers, the ministry expects output to grow 12.0 percent in June and climb 2.5 percent in July.

Ideas:

It would be very good if output increased that much in June and July. But no offense the one esttimate might be a little high with all of the external factors and internal factors that could affect production in the future.

If production reached half of the estimates quoted it would still be a positive for Japanese manufacturing.

The 2.5 percent estimate probably is more realistic at this time.

But any increae in output should be consdered a positive with all the challenges out there.

Have a nice day and be safe!

Japan Households and Prices:

 Article Source: https://mainichi.jp/english/articles/20220626/p2g/00m/0na/006000c

Article:

TOKYO (Kyodo) -- Japanese households are becoming increasingly less tolerant of surging prices of food and daily necessities, according to a recent analysis of Bank of Japan surveys by a research company.

The Mizuho Research & Technologies Ltd. analysis of the household spending surveys runs counter to BOJ Governor Haruhiko Kuroda's remark in early June that consumers had become "tolerant" of rising prices.

Ideas:

It's unfortunate that Japanese households/consumers have become less tolerant of the incease in prices. 

Part of the problem is Japan has maybe for too long gotten used to lower prices and now as prices are increasing they can't see why prices have to increase. 

It might be both a psychological challenges and of course a budget challenge as most consumer probably haven't received a wage increase for a very long time.

Which means they are living on less because of the increase in prices and they have less extra income to spend.

Article:

Kuroda was later forced to retract it and apologize following a backlash from the public.

The company also found a growing tendency to cut back on expenses for food and beverage.

Using data from the BOJ quarterly surveys, Mizuho Research quantified households' tolerance by subtracting the percentage of respondents who considered price hikes "troubling" from those who perceived them as "desirable."

Idesa:

Its logical that consumers are cutting back on expenses. As Japanese consumers for too long maybe have gotten used to lower prices they might not want to spend as much as before. 

But hopefully maybe Japanease consumers will get back and continue to spend for the good of the economy.

The idea that anyone gets used to higher prices is not correct but even if consumers don't get used to the idea of higher prices they might reluctantly get back out and spend agian.

Maybe not as much but consumers and spending is an activity that is inherent in consumers and whether they like it not they might begin to get out there and spend.

Article:

The analysis of tolerance progression between June 2004 and March 2022 showed households' tolerance for rising prices markedly decreased from the second half of fiscal 2021 when surges in oil prices became salient.

Tea bags, futon bedding, air conditioners and cooking oil were among the items that consumers significantly cut back on, the company said, citing its separate analysis based on government statistics such as the consumer price index and the household expenditure survey.

Ideas:

Yes, as prices continue to increase consumers may over time begin to feel less tolerant toward higher prices and begin to cut back or find subsitutes.

But at the same time that might not be all consumers as some consumers may relunctantly continue to buy and spend despite the hgher prices.

Everyone has a different tolerance level. and even though prices might be increasing some some products they like they might still continue to buy them.

We can't say all consumers are the same as each consumer has differnet likes and dislikes in products and services. So its not always easy to lump all consumers into the same buying behavior category.

Article:

Saisuke Sakai, senior economist at Mizuho Research, called attention to the disproportionately high burden rising prices place on low-income households.

"They are less tolerant of price hikes as daily necessities make up a bigger proportion of their spending," compared with their better-off peers, Sakai said.

Ideas:

Yes, the low-income groups are really burdened now because of maybe the increase in eggs, bread, milk, rice and so that they need everyday and everyweek.

So the Japanese government, to help low-income households, needs to find ways to help them through this period. Either with subsidies that these households can get at government centers and or put prices controls on some products to ease the burden of low-income houesholds.

And the Japanese government should make the distribution of food subsidies as pain-free as possible and not make the process too challenging with a lot of un-needed paperwork becuase many or some might not take advantage of the governmen subsidies related to buying food.

Have a nice day and be safe

Japan Core Consumer Prices:

 Article Source: https://mainichi.jp/english/articles/20220624/p2g/00m/0bu/019000c

Article:

TOKYO (Kyodo) -- Core consumer prices jumped 2.1 percent in May from a year earlier, staying above the Bank of Japan's inflation target for the second straight month, lifted by higher energy and food prices, government data showed Friday.

The nationwide core consumer price index excluding volatile fresh food items rose for the ninth straight month, a sign that cost-push inflation has shown no signs of abating as a sharp slide in the yen continues to inflate import costs for resource-poor Japan.

Ideas:

It must be remembered that the 2.1 percent increase is only related to increases in producer and wholesale prices increases and not relatted to consumer demand in the Japanese economy.

Most likely prices will continue to increase for the considerable time, which means consumers, whether they like or not have to get used to the higher for the time being.

The Japanese government could impose some price control if needed to keep prices down to help those on fixed incomes and low income groups.

Article:

The fading out of the year-on-year impact of lower mobile data fees is also a factor behind the increase in the key gauge of inflation, the Ministry of Internal Affairs and Communications said.

The BOJ has maintained its ultralow rate policy on the view that cost-push inflation will only be transitory, diverging from its U.S. and European peers that are raising interest rates to fight inflation. But it has faced increased pressure to tweak policy to address the yen's weakness.

Ideas:

Did lower moble data fees really have that much of an impact on the consumer price index overall? 

If they did it might mean of course mobile fees were high be begin for the market and they needed to be reduced for the benefit of the average consumer.

The cost -psuh inflation might only be tranistory or short term but tell that to the average consumer or company that is seeing its costs continue to increase.

Yes, eventually the BOJ might have to do sometthing if the yen continue to get weaker and weaker which is hurting importer maybe too much now.

Article:

Energy prices surged 17.1 percent from a year earlier. Kerosene prices leaped 25.1 percent and gasoline jumped 13.1 percent even as the government subsidized oil wholesales to curb retail prices rises, the data showed.

Food prices, excluding perishables, gained 2.7 percent, marking the fastest pace of gain in about seven years.

Ideas:

The increase in energy prices most likely will not be aborbed by companies but passed on to the next in the supply chain meaning even higher prices in the future.

The government subsidizing oil wholesalers is good but the problem is oil and gas prices continue to increase like there was no subsidy.

Food prices will continue to increase as long as the yen is weak and also because of raw mateiral prices that are imported from overseas.

Article:

Rising prices are among the key issues in the House of Councillors election next month as opposition parties step up criticism of Prime Minister Fumio Kishida's government for its lack of action.

The so-called core-core CPI, excluding both energy and fresh food prices, gained 0.8 percent, marking the second straight month of increase.

Ideas:

If the House of Councillors was really interested in the increase in prices they would have acted on it a long time ago.

Unfortunately some or many issues are not looked at or talked about until there are elections.

The CPI wil continue to increase until the yen dcreases and or raw material prices begin to decrease and that might be for a while.

Perhaps Japanese consumes and Japanese businesses have become to used to deflation and or constant low prices and it might take some time for them to get used to the idea that even in Japan prices can increase.

Have a nice day and be safe!

Japan Food Prices:

 Article Source: https://mainichi.jp/english/articles/20220620/p2g/00m/0bu/031000c

Article:

TOKYO (Kyodo) -- Food manufacturers in Japan have been hiking prices as a result of rising raw material and crude oil costs, data showed Monday, dealing a blow to households already hit by the fallout from the coronavirus pandemic.

The average price of cooking oil at supermarkets across the country spiked 1.5-fold in May from a year earlier, while that of mayonnaise was up nearly 30 percent, according to Japanese analysis company True Data Inc.

Raw material and crude oil costs have risen in line with higher demand as economies recover from the coronavirus pandemic and due to global supply chain disruptions. Japan has also seen the cost of imported products rise due to the yen's depreciation against the U.S. dollar and other major currencies.

Ideas:

Just as food prices in other cuntries are increassing its understandable that food prices finally begin to increase.

Maybe in normal economi situations Japanese companies might not pass on their costs t the next in the supply chain which most likely is the final cutomers but these are not normal economic times.

Supply chain distruptions now seem to be consttant or since the pancdemic started have continue to a problem for Japan and its importers.

Households or consumers are always the first and last to feel the change in prices and maybe they might not have any real subsitutes at lower prices and maybe all food price hsve increased.

Article:

While supermarket operators decide the price of products sold at stores, many of them have passed on rising costs from food manufacturers to customers due to the difficulty of absorbing price hikes.

The prices of margarine products, spaghetti and white bread spiked by about 10 percent, according to True Data.

In about a year since spring last year, Nisshin Oillio Group Ltd., a producer of edible oil, has hiked costs five times and its rival J-Oil Mills Inc. has raised prices between five and six times.

Ideas:

Companies maybe for too long have absorbed their price increases and its at the point that they can no longer afford o abosrb costs and now they have to finally pass on their costs to the customer.

Maybe some consumers don't notice the price increases that much but for most consumers the price increases are cutting into any extra income they might havr for other actvities in the economy.

As seen above it seems some companies don't seem hesitant about increaing prices but many companies before now were probably hesitant for fear of losing custmers.

Anytime there are price increases and customers can feel it and it cuts into their extra income that is less inceome for any other economic actvivity 

Article:

As a result, the price of edible oil increased from 213 yen ($1.5) per liter to 323 yen.

A bottle of mayonnaise, with about 400 to 450 grams of content, increased in price from 175 yen to 226 yen.

A recovery in demand following the pandemic has also contributed to pushing up grain prices, with 600 grams of spaghetti rising from 256 yen to 292 yen and a kilogram of wheat increasing 9.0 percent from 233 yen to 254 yen, according to the data.

Ideas:

Price increase across the board will contiue to increase until raw material prices from overseas settles down. The weak yen doesn't help too. 

A weak ye, with increases in impot prices related to raw material cost increases and energy cost increases has not been very kind to the Japanese economy.

But it must be remembered. The Japanese economy is abig econmy, the 3rd largest still in the world. There are still many positives in the economy despit all the news about inflaton and increased costs.

Article:

However, private-sector economists believe food prices will continue to rise as the outlook of Russia's war in Ukraine remains uncertain and the yen's weakness will swell import costs.

"Food and other prices will continue to increase until the impact of the weak yen and high crude oil prices could subside as early as this fall," said Koya Miyamae, a senior economist at SMBC Nikko Securities Inc.

Ideas:

Prices might continue to increase but for a long time Japan lived with deflation or decreasing costs. So even as prices begin to increase and continue to increase eventually prices in Japan might get in line with prices globally.

But thern there is the weak yen situation. Its understandable with Kuroda and the Bank of Japan is doing and will continue to do but eventually maybe the BOJ might need to take some kind of decisive acatin to curb the weak yen.

But of course there are going to be some positives and negatives for whatever action th BOJ takes in the future.

Have a nice day and be safe!

Japan Economic Assessment:

 Article Source: https://mainichi.jp/english/articles/20220620/p2g/00m/0bu/036000c

Article:

TOKYO (Kyodo) -- The Japanese government on Monday kept intact its key assessment that the economy continues to recover from the coronavirus pandemic fallout, but warned of the impact of a prolonged war in Ukraine and slowing economic activity in China.

Regarding the current state of the Japanese economy, the monthly report said it "shows movements of picking up," maintaining the assessment for the third consecutive month, citing improvements in private consumption and business investment.

As for the economy's prospects, the report said the recovery is expected to be supported by measures against infectious diseases and normalizing economic and social activities, without specifically mentioning the word "coronavirus" after dropping it from its assessment last month.

Ideas:

The Japanese economy may well be on the way to some kind of recovery but most likely there are some or many parts of the economy that are far from being where they were before the pandemic.

And now add in the Ukraine situation along with continued increased material and energy costs and the weak yen compounding the price increases and there are still a lot of challenges for the Japanese economy.

Business spending and cosumer spending might be picking up but where are they in relation to the spending of 2019 and if not can we guess when business spending gets back to some kind of normal.

Consumer spending is a different entity as consumer spending as never been at the level of other advanced economies. as Japan and Japan society, for the most smart, can't be characterized as a free spending economy like for example the US economy and US consumers.

Article:

By component, it said private consumption "shows movements of picking up," retaining the expression for the third straight month, as spending continues to recover in the services sector including dining out and travel to nearby areas, a government official said.

But the government downgraded the view on industrial output for the first time in seven months, saying any pickup is "pausing" due to weak production of electronic components and construction machinery amid a shortage of semiconductors.

Meanwhile, it revised upward the state of housing construction that it is becoming "solid," backed by increasing demand for condominiums, the official said.

Ideas:

Private spending might be picking up, which is good, but is it sustainable with all of the related price inflation at supermarkets, restaurants, stores and of course energy prices in the homes.

Private spending as always been somewhat of a weak variable in the Japanese economy as Japanese spenders just don't spend like their western counterparts. 

So while advanced economies like the US can depend on consumer spending to spur to economy and help it grow, the BOJ can't depend on Japanese consumers to do the same.

Industrial production is never a complete linear upward trend and there are always some situations where there are pauses in production.

Construction also might be solid but just does that really mean and are there going to be enough home buyers to meet the need or demand for the condominiums that are being built

With raw material and energy costs increasing it will also mean the price of new homes is going to increase. Is the housing market in a sustainable trend or is just a temporary increase that the housing market is seeing at the moment.

And then ther is always the chance for a housing market bubble, meaning becuase of increased material and energy costs along with some kind of demand are prices going to get unnaturally high for the market which could cause a housing markeg glut of unsold homes in the future.

Article:

It also upgraded the assessment on imports, saying the decline has halted, reflecting increased domestic demand for crude oil, liquefied natural gas and coal, according to the official.

The government said consumer prices "have been rising recently" for the second month in a row after data showed inflation in April climbed 2.1 percent from a year earlier, the fastest pace in seven years, stemming from higher commodity prices and a weak yen.

Ideas:

The demand may have increased for imports but what about the price of imports with globall material costs sky-rocketing and energy prices too becoming too high. 

Someone has to pay for the increased import costs and most likely the importers alone are not going to pay and they most likely are going to pass on some or all of their costs.

Again it must be noted that the increase in consumer prices is not because of an overall increase in conumers spending in the Japanese economy. Consumer prices are increasing because whomever are passing on their increased costs onto consumers in relation to supermarkets, restaurants, and so on.

This kind of inflation is supplier inflation being passed on to the next in the supply chain and eventually the final consumer at the department stores, the restaurants, the cofffe shops, the supermarkets and so on.

So the BOJ needs to make a clear distinction and not call is exactly consumer demand inflation. Yes they do say its from commodity prices etc.

But as far as the BOJ's idea of reaching its goal of 2.0 percent inflation related to consumer demand or consumer spending its not there yet.

Article:

Looking ahead, the government noted "full attention should be given to downside risks" due to rising raw material prices, supply-side constraints and fluctuations in the financial markets, citing the ongoing conflict in Ukraine and suppression of economic activities in China amid COVID-19 restrictions.

The office kept its assessment on the world economy as well, saying that it appears to be "pausing" in some parts but is picking up as a whole.

Ideas:

The use of the word "pause"is most likely a good phrase to use and yes, the global economy the global marketplace might not be where it should be but with all of the challenges at this time a pause should not be a surprise.

There are just too many kinks or negatives that keep the global economy from moving at full capacity at this time and maybe even its going to be same for much of 2022.

The situation in China might not improve any time in the near future and for the most part the Chinese economy is slowing down, which it has been doing for awhile.

And then now the Chinese policy of shutting everything down when there are some virsu cases doesn't help any business in China, whether Chinese or foreign and certainly doesn't help supply chains the run through China.

So yes the Japanese economy might be seeing some growth but there are just too many distractions at this time.

Have a nice day and be safe!

Bank of Japan And Key Rate:

Article source: https://mainichi.jp/english/articles/20220617/p2g/00m/0bu/022000c

Article:

TOKYO (Kyodo) -- The Bank of Japan on Friday maintained its ultraeasy monetary policy in defiance of growing market pressure to tweak it, unfazed by the prospect of further yen weakness as it lags far behind major peers forging ahead with rate hikes to fight inflation.

In a widely expected move, the central bank decided at a two-day policy meeting to set short-term interest rates at minus 0.1 percent and guide 10-year Japanese government bond yields around zero percent. The yen plunged well below 134 against the U.S. dollar immediately after the decision, though the Japanese currency rebounded quickly and trading became volatile.

Ideas:

The Bank of Japan, whether good or not so good, as decided to continue with it easy money policy compared to other advanced economy central banks.

There might be some good reasons for what the BOJ is doing. It might be thinking that the Japanese economy is just too fragile at this time to increase rates and that rate increases might actually be a negative for many in the economy.

While a 0.1 perdent rate might be good for short-term borrowers such as businesses that need loans because of the increase in material costs or the increase in energy costs, it might not be good for ther overall health of the banking industry unless of course the BOJ has some kind of protections or susidies to protect them from losses.

Volatility, which is the rapid increase or decrease of something is very hard to manage from a company perspective. Companies need stability not something that is up and down constantly. Companies are unable to prepare correctly to the quick changes in prices, currency exhange rates and so on unless they have the resources to use future buying markets and other financial tools, which many small and medium sized companies don't have.

Article:

The BOJ seems to be in a bind. It needs to justify its need to retain its ultralow rate policy based on the view that a recent bout of inflation will not be sustainable while the yen's rapid depreciation, a byproduct of its dovish stance, raises import costs for resource-scarce Japan.

Leading up to the decision, the BOJ's resolve to cap a rise in the benchmark 10-year yield above 0.25 percent had been increasingly tested by investors expecting the central bank to tweak its monetary policy.

It reaffirmed its commitment to unlimited purchases of 10-year bonds at a fixed rate of 0.25 percent every business day in principle.

Ideas:

The BOJ knows it can't please everyone and whatever it does is not going to keep everyone happy. So it has to balance out the best it can the positives and negatives on what it thinks is best for the Japanese economy.

If the BOJ does increase rates or increase them too much or too fast it could cause some real problems with borrows because of increasing material and energy costs.

Well you might say a rate increase might make the yen a little stronger which might be but how long will it take for energy and material prices to get back to some kind of normalcy and what kind of damage will the economy and companies go through in the process.

So there is a lot of unceertainty at this point on what and how should be BOJ do or do anything different.

Article:

The BOJ stuck to its view that the economy has "picked up as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19 and a rise in commodity prices."

With the yen on a falling trend, the central bank said, "It is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices."

Major central banks are scrambling to tame soaring inflation. The U.S. Federal Reserve went ahead with a 0.75 percentage point rate hike on Wednesday, the largest since 1994, and the central banks in Britain and Switzerland also followed suit by raising rates. The European Central Bank is planning to hike rates in July.

Ideas:

I think what is missing is that the current inflation situation globally is not demand or consumer inflation but supplier inflation and not even supplier inflation but something much different. 

Most likely not even suppliers why understand prices keep increasing and or they can't control prices too.

So the idea that as rates increase there is going to be less supplier activity which then might lower prices and inflation might not be the best approach and even suppliers might not be able to control prices in this current scenario.

So maybe the BOJ sees this and undersands this is not consumer demand or maybe not even the normal inflation that was seen before the pandemic.

This might be a kind of inflation that in reality just hasn't happened in a very long time and the normal strategies of central banks might not work in this scenario.

But again most of the blog writings here are just the brain storming of ideas.

Article:

The yen has met intense selling pressure as financial markets expect the gap in interest rates between Japan and its overseas peers to widen.

The rapid fall of the yen, which recently plunged below 135 to the U.S. dollar, prompted Governor Haruhiko Kuroda to highlight its negative impact on the economy whose recovery from the COVID-19 pandemic remains fragile.

The BOJ chief is scheduled to hold a press conference later in the day to explain the policy decision.

Ideas:

The yen probably will continue to see a lot of pressure in selling markets because of the difference between the yen, the Euro, and US dollar.

Kuroda know that the weak yen might not be good for all in the Japanese economy but most likely at this time, has decided to just stay the course and they probably knows the BOJ has to balance out as much as possible the positives and negatives of the weak yen.

He probably knows the increased raw material and energy costs are being compounded becasue of the weak yen feels to change course now might cause more harm to the economy.

For example a small company might need a loan because of the increased energy and material costs, and needs the loan to stay in business.

So at -0.1 percent the small company might feel good about the loan but if the BOJ increases the short rate it might not be good or a company and now they have compounded material and energy costs increases and now they have to pay even more for the loan at a positive rate meaning even more challenges for the company or any company especially small and medium size that don't have the resources to overcome the current inflaton and weak yen challenges.

Have a nice day and be safe!