Japan Consumer Prices:

 Article Source: https://mainichi.jp/english/articles/20230519/p2g/00m/0bu/019000c

Article:

TOKYO (Kyodo) -- Inflation in Japan accelerated again in April, with core consumer prices rising 3.4 percent from a year earlier, as consumers took a fresh blow as food and durable goods prices jumped, government data showed Friday.

The rise in the core consumer price index, excluding volatile fresh food items, remained above the Bank of Japan's 2 percent target for the 13th consecutive month, putting further pressure on the central bank to tweak its ultralow rate policy. The key gauge of inflation gained 3.1 percent in March.

Ideas:

A 3.4 percent increase in prices might not seem like much but prices have been increasing steadly over the past 13 months which means its not just the 3.4 percent increase but multitudes of price increases.

By now the average consumer might be thinking when is this going to end as prices just keep increasing in Japan. 

And maybe some or many consumers are beginning to cut-back on what they buy and unfortunately might buy some food that might not be a good because of lower prices.

The 2 percent rate of the BOJ might never be reached as it all about consumer spending and consumer demand and if inflation goes as it it, consumer spending might be where it should be.

Article:

Core-core CPI, which strips away energy and fresh food prices, climbed 4.1 percent, the highest since September 1981, providing evidence that inflationary pressure is persisting, data from the Ministry of Internal Affairs and Communications showed.

Among notable gainers, food prices rose at the fastest pace in nearly 47 years, up 9.0 percent. Durable goods prices leaped 9.8 percent.

Energy prices fell 4.4 percent, with kerosene, gasoline and electricity bills pushed lower by government subsidies that drove core CPI down by around 1 percentage point.

Ideas:

Unfortunately the lower income groups have the most challenges with inflation and food prices and they spend more porportionally on food than higher income groups. 

But in this case maybe even the average income groups in Japan are now feeling the food price increases and maybe are beginning to pick and choose what they want and need becuase of the 9.0 price increase.

A 9.0 price increase might not affect many consumers but there might be enough that consumer spending on some foods might not be as high if there weren't any inflation related to food prices. 

Once inflation starts its like a mutlipier affect, it begins to affect many products in many sectors. 

Article:

"Public perceptions that prices won't increase are changing," said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting.

"Up to now, consumers have accepted price hikes partly because of savings accumulated during the COVID-19 pandemic. But this may be reaching a breaking point, with more price hikes planned, including for electricity," he added.

In a fresh sign of broadening price increases, service prices gained 1.7 percent, the fastest rise in 28 years when the effects of past consumption tax hikes are excluded.

Ideas:

Public perceptions are not always what they seem and sometimes they might not know or accept what is really happening.

In this case maybe because of de-flation, Japanese consumers haven't felt or seen inflation affecting them until recently in Japan. 

But as inflation continues to increase maybe many Japanese consumers are finally to feel and see the affects of inflation in their lives.

Maybe during the pandemic Japanese consumers didn't spend a lot and were able to save a lot but not that the pandemic has ended maybe now they are out and about spending as much as possible.

But yes, there might be a breaking point where consumers begin to feel inflation affecting their incomes and savings.

Article:

Rising prices for everyday goods are already hurting consumer sentiment, but private consumption remains resilient because of pent-up demand, especially for services following the lifting of COVID-19 restrictions, economists said.

The BOJ believes the pace of gains in the inflation rate, pushed up for months by surging import costs for energy and raw materials, will start to slow later this year.

Major utilities are planning to raise electricity prices in June, though the hikes will be less aggressive than initially envisaged.

Ideas:

Consumer sentiment has never been that strong in Japan because of maybe low wage growth and as prices continue to increase it might continue to be challenged.

Yes, pent-up demand might be driving cosumer spending at this time, but as prices continue to increase consumer spending might begin to decrease some as consumers begin to cutback be of inflation.

The BOJ has been saying, right or wrong, that inflation will slow but it hasn't slowed much or decreased much recently.

The price increses with servies is a different category as maybe because of the pandemic and loss of sales and revenue during the pandemic servies-type businesses are increasing prices to makeup for the loss of profits and revenue during the panemic.

Even a slight increase in elecrticity prices, as this point, might be too much for some consumers as they will have to cut-back on some purchases on some items in the future.

Article:

The BOJ expects core CPI to rise 1.8 percent in the current business year from April, with core-core CPI forecast to increase 2.5 percent. The central bank has not budged over its stance of retaining monetary easing to create an environment in which price hikes are accompanied by strong wage growth.

Toru Suehiro, chief economist at Daiwa Securities, said food prices will continue rising but the pace of inflation will likely slow.

Ideas:

Strong wage growth might be a lantent variable, meaning wage increases might not affect the economy immediately has it might take some time for wage earners to see and feel the wage increases and then decide just what do with their extra income from the wage increases.

At this point even small increases in food prices might still be too much for some as food prices have continued to increase and its not just a one time increase but many months of increases. There is a definite multiplier affect as prices keep increasing one upon another over time.

The BOJ has staked its reputation on keeping monetary easing low and it they were to reverse course at this time, it might seem like they have admitted they were wrong all along on their policy.

Article:

"It's hard to expect core CPI will rise 4 percent again," after climbing 4.0 percent and 4.2 percent last December and in January, respectively, Suehiro added.

According to research firm Teikoku Databank, over 30,000 food items could see price increases in 2023.

Ideas:

Yes, core CPI might not increase 4.2 percent or even 4.0 percent but maybe 3 percent or even 2 percent. But the problem is inflation has increase steadily over the past 2 years and has compounded the affects on consumers over time.

Consumers in 2023, of course will need to pick and choose what they need and what they want and mabye have to choose subsitutes or different food items if their favorite or usual  foods have become to expensive over the past two years.

If wage increases, for some or many beging to take an affect on the economy, perhaps inflation might begin to not have that much of an affect on the economy and consumer spending over time.

Have a nice day and be safe!