Japan Wholesale Price:

 Article Source: https://mainichi.jp/english/articles/20230515/p2g/00m/0bu/012000c

Article:

TOKYO (Kyodo) -- Wholesale prices in Japan rose 5.8 percent in April from a year ago on higher energy and food prices but the pace of the increase continued to slow, with import costs falling for the first time in over two years, the Bank of Japan said Monday.

The increase in the corporate goods price index, which measures the prices of goods traded between companies, was the smallest since August 2021. It marked the 26th straight month of year-on-year growth, boosting the likelihood that consumer prices, which track producer prices with a lag, will remain elevated.

Ideas:

Wholesale prices might have slowed some but most likely companies are still going to pass-on their increased cost to the next in the supply chain, the next company or the final consumer.

Consumer prices are always lagging or always lag as companies decide if and when they should pass-on their increased costs to the next in line including the final consumer.

Import price might has slowed or might have fallen but are probably still too high for the average business and or the average consumer.

Article:

Government efforts to bring down fuel costs took some pressure off the index. Without government subsidies, wholesale prices would have gained 6.5 percent, according to the BOJ.

In yen terms, import prices dropped 2.9 percent amid the waning impact of the currency's weakness, down for the first time since February 2021, while export prices climbed 1.8 percent.

Ideas:

Its good that the Japanese government implemented subsidies as a way to lower wholesale prices as without subsidies wholesale business would have had no choice but to pass-on their increased costs to the next in the supply chain.

But are the subsidies enough to help whomever or do they fall short or what is really needed. If energy costs keep increasing then maybe a 6.5 percent is not enough or maybe the government can't do more than what they are doing now.

Export prices might continue to increase as raw materials, needed for manufacturing, keep increasing as import prices increase as the variance between the US dollar and the Japanese yen increases.

Article:

Japanese companies have been passing on higher energy and other raw material costs to consumers. The yen's sharp depreciation last year has also inflated import costs to the detriment of resource-scarce Japan.

But the BOJ is in no hurry to tighten its monetary policy as consumer inflation, which remains above its 2 percent target, is expected to start slowing down later this year and the bank hopes to ensure wages continue to rise.

Ideas:

Japanese companies for very long time were reluctant to pass-on their increased costs to the next in the supply chain including maybe the final customer the consumer.

But now as their profit margins get smaller and smaller maybe now they feel they have no choice to pass all or some or their costs to maintain profit margins.

And then the weak yen has inflated import prices even more than usual as Japan is heavily dependent on imports from many places including the US.

Quite possible the increase in imports and for example raw materials might then translate into higher export product prices which could cause Japanese products to be less competitive globally.

Article:

Among major gainers, electricity, city gas and water bills jumped 25.8 percent from a year earlier while iron and steel prices rose 10.9 percent. Food prices gained 7.0 percent.

But petroleum and coal product prices dropped 6.6 percent after their sharp gains lifted the overall wholesale price index in recent months. Prices of lumber and wood products plunged 17.9 percent.

Ideas:
Japanese households might be thinking when is it going to stop when are the prices going to level off and not continue to increase in the future.

A 25.8 percent increase is a lot for the average family which means they might have to reduce their extra spending or disposable income spending to make up for the losses related or increased energy costs.

Even food prices increased 7.0 percent which means that maybe low-income groups have to cut-back on some items as they proportionally spend more on food than the upper income groups.

Even though only a 7 percent increase for the low-income groups that might be too much for whatever they need to buy.

Article:

"We will continue to closely monitor developments in commodity and import prices affected by foreign exchange rates and how higher costs will be reflected (in consumer products)," a BOJ official said.

Ideas:

Many companies such as food manufacturing companies might for example pass-on their costs in many different products as a way to spread out the cost increases. For example they might increase the cost of one product by 200 yen, another product by 300 yen and so on as a way to try and minimize the price increases onto the customer.

Maybe a food service, fast food company, might do the same thing with its products and they to try to spread out the costs so that anyone product doesn't cause stress onto anyone customer too much.

Have a nice day and be safe!