Japan Core Consumer Prices:

 Article Source: https://mainichi.jp/english/articles/20221021/p2g/00m/0bu/010000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices leaped 3.0 percent in September, marking the sharpest gain in over 31 years, as a faltering yen inflated a range of import costs from energy to food, government data showed Friday, complicating the Bank of Japan's commitment to monetary easing.

The nationwide core consumer price index excluding volatile fresh food items remained above the BOJ's 2 percent target for the sixth straight month, and economists expect it to rise further toward year-end.

Ideas:

It seems inflation is at an all time high globally and not just in Japan, but at the same time is still lower than other countries.

It should be remembered that the BOJ's 2 percent target is/was focused on consumer inflation and not producer inflation has is happening now. Yes, consumer prices are increasing but that is because producer prices keep increasing and producers/stores are passing on their increased costs to the next in the supply chain.

So as prices/inflation continues to increase consumer disposable income will become less and less which means Japanese consumers will have to find ways to make their disposable income count for every purchase.

Article:

The headline figure marked the largest year-on-year increase since August 1991, if the effects of a series of consumption tax hikes are excluded. When the tax increases are factored in, the key gauge of inflation saw its biggest gain since September 2014, according to the Ministry of Internal Affairs and Communications.

"Price hikes are broadening and the weak yen effect is seen in a wider range of items such as durable goods," said Toru Suehiro, chief economist at Daiwa Securities Co.

Ideas:

If price increases are going to continue Japanese consumers will continue to see their disposable income become less and less which means less and less spending in the Japanese economy.

Which means Japan's GDP growth is going to be even less than expected for fiscal 2022.

If consumer spending doesn't increase, businesses can't expect to increase sales and if they can't increase sales which means they can't see a improvement in profits, which then means again wage increases are nowhere to be found.

It has the potential for a never-ending scenario that the Japanese economy is going to be stuck in stagflation or increasing prices and no or little economic growth.

Article:

"Consumers cannot stop buying food and other everyday items so what they do is to cut back their spending on services such as entertainment, which could be a blow to the service sector that needs to recover from the COVID-19 fallout," Suehiro added.

In fresh evidence of broadening price hikes in Japan, core CPI rose for the 13th straight month on a year-on-year basis as Russia's war against Ukraine sent crude oil, raw material and grain prices sharply higher while at the same time the yen continued its slide against the U.S. dollar.

Ideas:

Most likely the buying of food and other necessities might go down some, services and entertainment is going to take the biggest hit, including eating out, shopping for some winter clothes, and other things. 

No doubt chains like Yodobashi Camera, as an example might see a significant decrease in sales except for the whatever is needed for basic things.

For example all the normal leisure shopping that some might do on the weekends might also see a significant decrease if prices continue to increase which lowers the disposable income or extra income that consumers/families might use on the weekends for going to mall areas such as Yokohama station and all of the stores there, or Landmark/Queen's Square in Yokohama that families and consumers might visit in on the weekends. 

And then add in all of the restaurants in those places might also see decreased sales as consumers try to cut back on their spending.

Article:

Prices of food other than perishables gained 4.6 percent, the largest increase since 1981, weighing on consumer sentiment, the ministry data showed.

Energy prices jumped 16.9 percent, with electricity and city gas, which track crude oil and natural gas prices with a lag of a few months, rising at a faster pace than gasoline and kerosene.

Amplified by the weaker yen, higher raw material and transportation costs lifted prices of durable goods such as air conditioners by 11.3 percent.

Ideas:

So it seems nothing in Japan is being spared related to price increases. Again if AC prices increasing most likely AC sales at places like Yodobashi Camera are not so good and maybe even heater for the winter period.

So families have pay even more for electricity and gas which cuts into their overall disposable income which again means less for spending in other areas which is going to affect many areas in the economy such as services, leisure spending and so on.

It's kind of hard to understand why the Japanese government is taking so long to implement a bill to help out families as inflation continues to increase.

Of course it's not just the government, but companies have give and significant increase to workers for a very long time, which means inflation is far ahead of wages which means less and less extra income for families. 

Article:

Cost-push inflation, or price hikes caused by rising imports of commodities and other items, has been persistent in Japan despite the BOJ's view that core CPI will likely undershoot its 2 percent target in the next fiscal year.

That position has enabled the BOJ to remain firmly committed to its ultralow rate policy, at the expense of a further slide in the yen that has increased import costs even more.

Many economists expect the rise in core CPI will continue but peak before the end of this year. That is partly because of the fading effects of sharp cuts in mobile communication fees offered by major carriers in response to government pressure in 2021.

Ideas:

Again it must be remembered that the BOJ's target of 2 percent has more do to with consumer demand and consumer inflation and not so much producer inflation.

What the challenge with the fading effects of cuts in mobile communication fees is mobile carriers will find ways to maintain their profit margins by increasing the prices on other services they offer. So in the end consumer might not be that much better off and they then have to or need to pay for other services.

The BOJ knows there are positives and negatives with the low rate but probably think to increase the rate at this time might actually cause more harm than good to the Japanese economy.

Article:

The cuts weighed on core CPI for months but the impact is expected to fall out of the data in October, a ministry official said, meaning that core CPI will be calculated from a higher base figure.

As inflation has become a concern for consumers, Prime Minister Fumio Kishida's government has been limiting the rise in retail gasoline and kerosene prices via subsidies to wholesalers, and managing the price of imported wheat.

Ideas:

Subsidies are both a positive and negative to an economy, as it might inhibit the normal actions of a market economy and probably companies can become too dependent them and learn not how to overcome its challenges in a normal working market economy.

Of course companies and others who continually depend on handouts and subsidies they never have how to work out whatever is needed to become a profitable company and or they never learn how to innovate.

Another example might be some traditional companies that never change or find ways to improve their profits over time and or they don't know how to innovate and continue to rely on their major bank to bail them out of situations.

Article:

The government is preparing another economic package to reduce the burden on households of rising utility bills amid faltering public support for the Cabinet.

So-called core-core CPI, which excludes both energy and fresh food, rose 1.8 percent for the sixth straight month of increase.

Ideas:

While it might help households its increasing the overall debt in the Japanese economy. But at this point as prices continue increase it might not be that much of a concern for the Japanese government at inflation continues to cause a lot of stress for households.

And there is alway the ideas that whenever public supports begins to falter that the Japanese government feels it needs to have some kind of economic package.

Why not have some positive action ahead of time so that public support doesn't falter and do things that help families and households the beginning instead of waiting until the public is not so happy.

Have a nice day and be safe!