Japan Wholesale Prices:

 Article Source: https://mainichi.jp/english/articles/20230412/p2g/00m/0bu/037000c

Article:

TOKYO (Kyodo) -- Wholesale prices in Japan surged 9.3 percent in fiscal 2022 from a year earlier, marking the fastest pace of increase, as a weaker yen increased import costs of energy and materials already boosted by Russia's war on Ukraine, Bank of Japan data showed Wednesday.

The sharpest gain since comparable data were made available in fiscal 1981 came a year after the index tracking the prices of goods traded between companies rose 7.1 percent in fiscal 2021, then a record high.

Wholesale prices affect consumer prices with a lag. A growing number of Japanese firms have been passing on increased costs to consumers by raising retail prices, a trend welcomed by the BOJ as it aims to see a 2 percent inflation target achieved stably.

Ideas:

There might be a lag because Japanese companies might still be reluctant to pass on their costs to the next in the supply chain including the final customer.

And or they may choose to pass only part of their costs with the idea that customers might get too upset with large price increases.

Just because a company passes on its cost to the next in the supply chain including maybe the final customer of course doesn't mean demand has improved and or increase consumer spending has improved yet.

Real inflation might not happen until wages improve and the customer/worker feels good about their wages and they begin the spend more.

Article:

But higher prices will continue to deal a blow to consumers unless wages rise and keep pace with accelerating inflation.

New BOJ Governor Kazuo Ueda has said Japan has seen positive developments toward attaining the inflation target in a stable and sustainable way, accompanied by robust wage growth. For now, however, he sees it necessary to retain the current ultra-loose monetary policy.

Ideas:

While its good that some companies, no many companies, have increased wages but are they enough to keep up with the current inflation situation. Meaning do workers feel better about their new wage increase and its enough to cover the increased inflation.

Only time will tell through Golden Week and the summer Obon season if consumer spending increases, stays the same, or decreases with either the wage increase and or the continued increase in inflation in Japan.

The ultra-loose policy is both a positive and a negative for the Japanese economy. Maybe the BOJ see it as a positive and they most likely won't change it anytime soon.

Its a positive for exporters as the weak yen helps exporter get more profits from overseas but its a negative for importer as the weak yen means import prices are too high for most companies and they have to pass-on their increased costs to the next in the supply chain.

Article:

In fiscal 2022 that ended on March 31, electricity, city gas and water bills leaped 37.6 percent from a year earlier. Other notable gainers include iron and steel, up 23.8 percent, as well as food and beverage prices that grew 6.7 percent.

In March, the pace of increase continued to slow for the third straight month, up 7.2 percent as crude oil prices have shown signs of stabilizing.

"We expect the rise (in wholesale prices) to slow to around 5 percent in April," said Chisato Oshiba, an economist at Dai-ichi Life Research Institute.

Ideas:

A 37.6 percent increase in utilities is a lot for the average Japanese family and probably even worse for low-income groups. 

An increase of 6.7 percent might be that much of a strain for most families but for those on fixed incomes and or low incomes, who use a spend a larger share of their incomes on food it could be an increase strain for them.

Even if wholesale prices slow to around 5 percent that means some or all of the 5 percent could still be passed-on to the next in the supply chains.

The challenge is not the percent but how often will wholesale prices continue to increase through the next year. 

For example again 37.6 is a lot but what it if goes to 38, 39, even 40 percent of an increase over time in the future.

Have a nice day and be safe!