Japan Wholesale Prices:

 Article Source:  https://mainichi.jp/english/articles/20221013/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Wholesale prices in Japan surged 9.7 percent in September from a year earlier to their highest level ever, as a sharp fall in the yen inflated import prices for energy and raw materials, Bank of Japan data showed Thursday.

The increase in the prices of goods traded between companies was the second highest, following a record 9.8 percent rise in April, with the year-on-year figure remaining above 9 percent throughout 2022 as Russia's war against Ukraine and the yen's rapid weakening add to inflationary pressure.

The corporate goods price index reached 116.3 in September, its highest level since comparable data became available in 1960.

Ideas:

Companies are probably going to have to keep passing on their costs and the prices increases don't seem to be slowing down anytime soon.

The weak yen continues to keep some prices high because of the difference between the yen and the dollar.

The only real positive is as the yen continues weak companies that need loans because of high energy and material costs they might be able to get a loan much easier.

If the Bank of Japan does decide to increase the key rate, they need to be very careful as it could cause a lot of companies stress as they might still need loans.

Article:

Wholesale inflation, which affects consumer prices with a lag, rose for the 19th straight month, threatening to hurt corporate profits. A growing number of Japanese firms have already been passing on higher costs.

Import prices soared 48.0 percent from a year earlier in yen terms. The Japanese currency has slumped to its lowest level in over two decades relative to the U.S. dollar, reflecting the widening interest rate differential between the two nations.

Export prices, meanwhile, rose at a slower pace of 20.1 percent.

Ideas:

As wholesale inflation increases it might time for the higher prices to reach consumers, as companies don't all use the same pricing strategies and company might be different from a different company.

The BOJ's strategy of not increasing the key rate at the same time or same level as the US might be positive and a negative.

It might be a positive in that maybe families and companies can get loans more easily in their favor but as we see it causes an increase in import prices which don't help related to inflation.

And as can be seen 48 percent to 20 percent is a big difference in that even export companies are losing profits as they have to pay even higher import costs too.

Article:

More than half of the rise in import prices in September was due to the effect of the yen's depreciation, the BOJ data showed, making it more challenging for the central bank to stick to its ultraloose monetary policy.

Japan stepped into the foreign exchange market by buying the yen for dollars on Sept. 22, but its first such intervention since 1998 has failed to reverse the trend of yen weakness. It was trading within striking distance of 147 to the dollar.

Coal and petroleum product prices jumped 14.7 percent, while steel prices surged 26.1 percent. Electricity, city gas and water prices rose 38.8 percent.

Ideas:

Japan might have to step in and buy more yen a few more times as it looks like the yen is not going down any time soon, as companies and consumers can only take so much.

However, if its true that companies and consumers,families, are sitting on huge savings in the banks then it might be possible to ride out this inflation situation.

But it must be remembered that not everyone or every company or every family is well off or the same and maybe the are under a lot of stress because of the inflation situation.

Spending in all areas, by companies and by consumers, will sbe less and less as long as the inflation situation continues on. 

Article:

The core consumer price index, excluding volatile fresh food items, has topped the Bank of Japan's 2 percent target in recent months, though the central bank is in no hurry to adjust its ultralow rate policy, viewing the recent inflation as unlikely to last.

The government is preparing a fresh economic package to soften the impact of higher prices on households and support the economy as economists expect the core CPI to top 3 percent this year.

Still, BOJ Governor Haruhiko Kuroda reiterated Wednesday that consumer inflation will slow in the next fiscal year to below 2 percent, justifying the central bank's unwavering policy stance.

Ideas:

Just what does "unlikely to last" mean exactly when inflation is affecting too many companies and too many consumers for a while now.

The new Japan economic package has got to be big enough to help as many companies and many families as possible.

A one-time handout of whatever size such as 50,000 yen is nothing compared to the continued increase in inflation.

The Japanese government could use price controls which help the consumer but doesn't help companies as their prices will continue to increase.

And then they could still allow companies to pass-on some their costs but not all as they want to keep a balance between what benefits the consumer and what benefits a company.

Its a very tricky balancing act and to try and keep the strategies balanced for both groups.

Have a nice day and be safe!