Japan Wholesale Prices:

 Article Source: https://mainichi.jp/english/articles/20220913/p2g/00m/0bu/057000c

Article:

TOKYO (Kyodo) -- Wholesale prices in Japan climbed 9.0 percent in August from a year earlier as the yen's tumble against the U.S. dollar and other major currencies boosted import costs, Bank of Japan data showed Tuesday.

It marked the 18th straight month of increase, lifting the corporate goods price index to 115.1 against the 2020 base of 100, renewing a record high, according to the central bank.

The surge has raised fears that recent price hikes by businesses may last in the long term, with consumers struggling to keep up with the rising cost of living as wages remain stagnant.

Ideas:

Wholesale prices will most likely continue to increase as long at the yen remains weak and the current trend of energy and raw materials costs continue to increase.

Japan is not alone as this seems to be very much a global situation even, if for example, the US dollar is strong, energy and raw materials costs continue to increase.

So even if the Bank of Japan does intervene and the yen does improve prices most likely will still be high but maybe not as high.

By this time, after 18 months if increases many if not all Japanease companies have decided to pass on some or all of their price increases. And as its been on going for now 18 months maybe some companies have passed on their costs more than once.

Even as Prime Minister Kishida has for the 3rd time asked companies to increase wages, most likely many companies might not be in the position to increase wages as their profit margins are thin or weak and or not where stockholders want them to be which seems to be a major consideration these day for many companies.

So consumers unfortunatley have to bear the brunt of the price increases and have to limit what they spend as their disposable income is now getting less each month.

Article:

Import prices in yen terms grew 42.5 percent, the fifth consecutive month that the margin of increase has surpassed 40 percent.

The Japanese currency hit a fresh 24-year low against the dollar last week, as the BOJ maintains its ultraeasy monetary policy in sharp contrast to the hawkish Federal Reserve, which has been raising interest rates to tame surging inflation.

Electricity, city gas and water prices surged 33.4 percent, while those of petroleum and coal products increased 15.6 percent. Steel prices rose 26.1 percent, and wood and lumber rose 20.2 percent.

Ideas:

A fifth consecutive month at 40 percent or more should be of concern to the Bank of Japan and the Japanease government but maybe the alternative for fixing or manging the situation has too many side-effects.

Some might say let the economy be natural and it eventually will fix itself naturally. Some might say there should be as much intervention as needed to manage the economy as it seems the economy it not able to fix itself naturally.

The bank of Japa must be weighing the costs and benefits of what to do and may feel at this time, as a weak yen helps exporters, is not willing just yet to increase rates as it might reduce the revenue of large exporters, and or there are too many side-effect that the Bank of Japan doesn't want to deal with.

The idea that increasing interest rates might take some time, as even the Federal Reserve has said the increased rates are not having any affect on inflation just yet.

As even as recently the Federal Reserve and others have admitted a major slow-down in the US economy and global economy might be the only real way to reduce inflation.

And on that maybe the Bank of Japan understands that a major slow-down in the Japanease might economy might be the only way to reduce inflation overall.

Article:

Japan has seen core consumer prices rise above the BOJ's target of 2 percent since April.

While export-oriented businesses, which have benefited from the weak yen, are under pressure to raise wages, the adverse effects of surging procurement costs may limit the change.

Ideas:

Many export companies are in a catch 22 situation meaning their energy and material costs keep increasing and at the same time their revenues from for example the US and the EU might be increasing.

So maybe many of them are not doing that good and still are unable to increase wages even if they want to.

And the same can be said for many Japanese domestic companies, who might not export, but have continous increases in energy and material costs, and their profit margins get thinner each month and each week.

And then there is challenges with housholds and energy costs and their energy costs continue to increase which means they have to limit the use of electricity, heating oil, which means now they have less and less disposable income.

Obviously the Japanese government and or the Bank of Japan just can't solve every economic challenge all at once as there are sometimes many side-effects and there are always positives or negatives to any and all economic actions.

So the Japanese government has to decide what is the best strategy to help households and at the same time find a strategy to help those businesses that really need help with the surge in energy and raw materials costs.

Have a nice day and be safe!