Japan Wholesale Prices:

 Article Source: https://mainichi.jp/english/articles/20230210/p2g/00m/0bu/016000c

Article:

TOKYO (Kyodo) -- Japan's wholesale prices rose 9.5 percent in January from a year earlier as companies continued to pass on higher energy and raw material costs while the pace of gain in import prices caused by a weakening yen moderated, Bank of Japan data showed Friday.

The prices of goods traded between companies climbed for the 23rd straight month, in evidence of persisting inflationary pressure that has been squeezing corporate profits. Corporate goods prices affect consumer prices with a delay, boosting the likelihood that the recent bout of inflation will continue.

The 9.5 percent gain followed a revised 10.5 percent jump in December, the largest since comparable data became available in 1981.

Ideas:

There is always a delay or lag in price increases as companies decide when and how much to pass on their costs to customers.

The pace of import prices might be weakening but that doesn't mean companies are going to stop or stop passing on their cost as long at the yen is weak, and energy and material prices continue to increase, even at a moderate level.

If we were to estimate the decrease in consumer spending based on how much companies pass on their costs to their customers it would be interesting to see how much each 1 percent of increase in inflation does cause a 1 percent decrease in spending, if any.

Article:

The BOJ has maintained that the inflationary trend, mostly driven by higher import costs, will not last long and its 2 percent inflation target will not be attainable on a sustainable basis. Still, higher prices of everyday goods have been denting household sentiment, with more price hikes seen in the offing.

After the yen's rapid weakening last year boosted the prices of goods brought into Japan, import prices remained elevated in January, up 17.8 percent from a year earlier. The gain, which followed the previous month's 22.2 percent, was the smallest since April 2021, reflecting a recent respite in the yen's sharp drop relative to the U.S. dollar.

Export prices, meanwhile, rose 9.0 percent, in yen terms.

Ideas:

The BOJ has maintained that the inflation trend is temporary but it seems it's been 2 years or more for inflation has continued in Japan.

The 2 percent inflation target seems like it was never achievable as long as worker salaries in Japan remained low or not much of an increase related to how much inflation as been increasing.

Consumer sentiment is never that strong compared to other advanced countries as some in Japan, such as the aged are not so keen on spending compared to the younger generations.

And now add in the continual inflation situation and there might be even less consumer sentiment to spend.

The yen might have seen a small gain only but its still high enough to cause challenges with import in Japan which relies heavily on import products.

Article:

Major contributors to the rise in the corporate goods price index are electricity, city gas and water, which leapt 49.7 percent, along with iron and steel, up 19.2 percent. The prices of food and beverages increased 8.0 percent.

Petroleum and coal products, however, dropped 0.5 percent, after surging crude oil prices last year became a headache for resource-poor Japan.

"The situation remains highly uncertain but we will continue to monitor developments in commodity prices affected by global economic conditions and the situation in Ukraine and import prices as well as how rising costs will be passed on," a BOJ official said.

Ideas:

Electricity, city gas, and water are all public utility sources that should be regulated and managed for the good of the economy and for the good of society.

Utility companies should not in the business of causing harm or continue to increase prices for their benefit or for their bottom line. At best they should be in a position to not be concerned with profit but maintaining their status as maybe a not for profit or non-profit public utility that serves society and the economy.

As long as prices continue to increase Japanese companies are going to continue to pass on their costs to the next in the supply chain.

The days of Japanese companies being reluctant to pass on costs and absorb costs seems to be a distant past like wester companies that are always passing on their costs as needed to maintain a certain profit level to keep investors happy.

Have a nice day and be safe!