Japan Consumer Prices:

 Article Source:  https://mainichi.jp/english/articles/20230110/p2g/00m/0bu/007000c

Article:

TOKYO (Kyodo) -- Core consumer prices in Tokyo rose 4.0 percent from a year earlier in December for the sharpest gain in over 40 years, in a fresh sign of broadening price hikes that hurt households and could add pressure on the Bank of Japan to tighten its policy, government data showed Tuesday.

Tokyo's core consumer price index excluding volatile fresh food items rose by the most since April 1982 when it gained 4.2 percent. The gauge, seen as an indicator of what to expect nationwide, was above the BOJ's 2 percent target for the seventh straight month.

In 2022, core consumer inflation accelerated 2.2 percent from a year earlier, topping the 2 percent threshold for the first time since 2014.

Ideas:

It must be remembered that the Bank of Japan's 2 percent target was never really about wholesale price increases but more about consumer spending and consumer demand.

Prices everywhere in the world are increasing and not just Japan. But maybe Japan's feels the price increases more as Japan usually has had lower prices for most products.

The Bank of Japan, it seems, should be under a lot of pressure to follow what the US and the EU is doing with interest rates.

Article:

Stripping away the price-boosting effects of past consumption tax hikes, it was the largest increase since 1992 when a 2.4 percent gain was reported, according to the Ministry of Internal Affairs and Communications.

A growing number of companies have been passing on higher costs of energy and raw materials to consumers in recent months, with Tokyo's core CPI up for the 16th straight month.

Japan initially saw higher fuel costs, partly blamed on Russia's war in Ukraine, prompting the government to give subsidies to oil wholesalers to lower gasoline and kerosene prices.

Ideas:

In 2014 and 2019 there were shocks to the Japanese economy due to the sales tax increases but it took a few months for consumers to get used to the sales tax increases.

But the current price increases related to inflation might not be easy to get used to as inflation just keeps increasing.

Companies in Japan usually don't pass on their costs to the next in the supply chain and they just absorb the cost to protect their customer base, but this time as inflation has increased at a rate not seen in decades maybe now companies feel they have no choice but to pass on their costs.

Subsidies are good but they need to be continued as inflations also keeps increasing over time.

Article:

Price hikes have since spread to other items, notably food, dealing a blow to consumers at a time when wage growth has not kept pace with accelerating inflation.

In December, the prices of food other than perishables leaped 7.5 percent from a year earlier.

Fuel costs remained high, with city gas surging 36.9 percent and electricity up 26.0 percent.

Ideas:

It must be very challenging for low-income earners and fixed income earners as prices continue to cut into any extra income they might have. 

Wages are another challenge as they can't kept up with inflation and even those with good stable jobs might feel their extra or disposable income keeps decreasing as inflation continues to increase.

Even a 7.5 percent increase in food, again, might be too much for low families as they now have to look for cheaper substitutes to make ends meet.

The Japanese government needs to continue subsidies with gas surges of 36.9 percent and electricity up to 26.0 percent, wholesales companies and households are feeling the effects.

Article:

Tepid wage growth is a major reason why the BOJ has stuck to its ultralow rate policy because it views higher pay as critical for the economy to withstand inflationary pressures.

The BOJ is considering raising its inflation outlook for fiscal 2023 and 2024, sources familiar with its thinking said earlier.

Market speculation is persisting that the Japanese central bank will move toward tighter monetary policy after it made a surprise decision last month to expand the trading band for 10-year Japanese government bond yields, a step interpreted as a de facto rate hike.

Ideas:

Wage growth could be the key to boosting the Japanese economy. But wages have got to be high enough that consumers,families, and households feel it enough for them to feel good about what they take home and what they have for extra income. 

For example, a 1 percent increase or something similar will do nothing for the economy.There has got to be bold significant move on the part of companies to get the economy out of its current situation and its not going to happen without significant wage growth.

Inflation should be equaled with the same amount of wage growth and or yearly cost of living increases that keep up with inflation 2023 and 2024.

Have a nice day and be safe!