Japan's Industrial Output: Updated Nov. 5, 2023.

 Article Source:  https://mainichi.jp/english/articles/20230731/p2g/00m/0bu/006000c

Article:

TOKYO (Kyodo) -- Japan's industrial output in June expanded 2.0 percent from the previous month, led by shipments of motor vehicles on the back of solid demand in both domestic and overseas markets, government data showed Monday.

The seasonally adjusted index of production at factories and mines stood at 105.3 against the 2020 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report. The increase followed a revised 2.2 percent contraction in May.

Ideas:

Industrial output is never linear or positive growth as there are many stops and starts related to industrial production.

For example Toyota had to take some plants off-line as they has complications with production.

All data starts out as preliminary and as other data and information is found, the indexes might be adjusted as needed over time.

An index is just a number and doesn't really show what is happening with each company as some companies might have good results and some companies might have challenges related to materials and so on.

Article:

The ministry maintained its basic assessment for the reporting month, saying industrial production was "showing signs of moderately picking up," while forecasting a dip in July and recovery in August.

Of the 15 industrial sectors the survey covers, output in 10 increased whereas production in five dropped.

Ideas:

As with other assessments, using the language of "showing signs of moderately picking up" is a good way to not show too much concern as the scare the capital or financial markets.

A forecast is nothing more than a "best guess" as to what might happen in the future. Of course they might use past data and computer programs to make the forecast but a forecast is never perfect, as its just ideas for the future.

There might be a dip or decrease in July as its the Obon season, or summer vacation period in Japan,  and maybe many companies have their vacations during that time, while they get back to work in August and production picks up again.

An economy, Japanese economy, has many sectors and the industrial sector might have many parts and not all increase or decrease at the same time as there are stops and start, material challenges, energy challenges and so on.

Article:

Among the 10 sectors reporting rising output, motor vehicles surged 6.1 percent, propped up by transmission, steering and other parts as well as trucks.

Production of electrical parts and devices also contributed to the overall rise with a 6.8 percent increase due to brisk demand for smartphone components and recovering demand for integrated circuit memory chips.

Ideas:

The car market and production is strong economic driver of the Japanese economy, as demand for cars in Japan and globally is always strong.

The Japanese smartphone market is a mixed bag as many Japanese smartphone companies have thrown in the towel because the I-phone and now Samsung are major players in the Japanese market.

And then of course Chinese smartphones are entering the Japanese market too which place more stress and pressure on Japanese smartphone companies.

Of course there might be many small smartphone component companies in Japan that make parts for Samsung, Apple, and other companies globally, as Japan is very good at making small components for electrical products.

Article:

The output of production machinery rose 0.2 percent, led by semiconductor manufacturing equipment due to solid exports, a ministry official said.

Among the sectors reporting decreased output, petroleum and coal products declined 5.3 percent and pulp, paper and paper products shed 2.1 percent due mainly to regular maintenance and repair work at some major plants, according to the ministry.

Ideas:

Its interesting that Japan is still in the semiconductor manufacturing business as Taiwan and South Korea have most of the market share.

But the electrical components needed for electrical products is very diverse and maybe one or two companies in South Korea and one company in Taiwan, don't make all the semiconductor products that are needed for all electrical products including cars.

Production facilities or plants are always being shutdown for routine maintenance or repair work throughout the year, and as such production might decrease during the year.

Production, again, is never linear, meaning there are sudden stops and starts, but some of the stops and starts are sometimes planned as plants need to be re-tooled and or repaired as needed.

Article:

The index of industrial shipments rose 1.5 percent to 104.8 for the first increase in three months, while that of inventories fell 0.1 percent to 105.5.

Based on a poll of manufacturers, the ministry expects output to decline 0.2 percent in July and climb 1.1 percent in August.

The official pointed out the need to closely monitor the effects of downside risks in overseas economies and the impact of high prices.

Ideas:

Japan is very good at producing products for industrial use. Some are major manufacturing companies that make many industrial products and then there are small manufacturing companies that might make just one industrial product for a product.

A said, before July is the Obon season for the Japanese summer vacation time, and many companies might take vacations during that time, which might reduce or slow production.

For Japanese exporters, higher prices can be both a positive and a negative, as the weak yen bring higher sales for Japanese companies, for example in the US. 

But it can be negative too, as Japanese products compete with Korean products and Chinese products as all three countries makes similar products and if Japanese products become too  expensive they lost out to those from China and South Korea.

Have a nice day and be safe!

Japan Economic Assessment: Updated Nov. 5, 2023

 Article Source: https://mainichi.jp/english/articles/20230726/p2g/00m/0bu/027000c

Article:

TOKYO (Kyodo) -- Japan on Wednesday retained its assessment on the economy as "recovering at a moderate pace," using the same expression for the third straight month, as domestic demand remains solid following the removal of anti-COVID curbs.

In its monthly report for July, the Cabinet Office said Japanese firms see improving business conditions, the first upward revision in the category in seven months.

Ideas:

The Japanese government and or the Bank of Japan, never wants to cause harm for investors and others so they always choose their words carefully. "recovering on a moderate pace" is a good way to calm everything down and not cause the financial markets to panic.

Domestic demand might be solid but for how long, as inflation continues to increase in Japan and globally.

Improving business condition might spur more job growth and more wage increases in the future if the Japanese economy continues on its present course.

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The change came after manufacturers were heartened by the easing of supply bottlenecks that had hurt production, while service providers continue to benefit from pent-up demand from the COVID-affected period.

The office also noted public investment is firmer, in the first upward revision in 11 months. Its views on other key components of the economy, from private consumption and capital investment to production and exports, were retained.

Ideas:

Ever since the pandemic there have been periods of stops and starts related to supply challenges either from China and or semiconductor shortage challenges.

Service providers have faced different challenges than manufacturers during and after the pandemic, as many service providers lost a lot of customers and had to lay-off workers as profits and sales decreased dramatically.

Now, as the pandemic has ended some service providers might be experiencing a labor shortage, and their former workers might have moved on to other jobs.

And most likely some service providers are actually increasing prices as they are trying to make up for lost revenue and sales during the pandemic, and taking advantage of the trend of higher prices all over Japan.

Article:

Japan's economy marked its third straight quarter of growth in the three months to June despite accelerating inflation, economists say. But they remain cautious about economic slowdowns in the United States and China, both major trading partners for Japan.

"The Japanese economy is recovering at a moderate pace," the July economic report said, adding that slowing economic growth overseas caused by global monetary tightening poses a downside risk.

Ideas:

After many quarters of not so good growth during and right after the pandemic, is not a surprise that the Japanese economy has rebounded but the rebound is just a combination of making up for pent-up demand in manufacturing and consumer spending.

The Chinese domestic economy has its own challenges and it might continue to cause challenges for Japanese exporters.

The US economy seems to be quite robust despite the US Federal Reserve continuing to increase  the key rate to combat inflation.

Japanese exporters should not focus too much on China at this time, as maybe in the future it will start to get back to some kind of new normal as China re-tools its domestic economy.

The US again is quite robust and the US car market is still strong for Japanese cars.

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"Full attention should be given to price increases and fluctuations in the financial and capital markets," it said.

The widening interest rate gap between Japan and both the United States and Europe supports the view that the yen's weakness will persist, analysts say, as ultralow rates will likely continue while the U.S. and the eurozone's central banks are raising borrowing costs to rein in inflation.

Ideas:

Fluctuations are never good in the financial and capital markets as both markets prefer stability and not a lot of movement up or down, as they can't react quick enough or prepare for continuous fluctuations.

The Japanese yens weakness is both a positive and a negative for Japan. For Japanese exporters it can be a positive as they are able to get higher prices for their products.

But it can also be a negative if the Japanese yen becomes too weak and its price competitiveness loses ground to Chinese and South Korean products in the US as all three countries have similar products and compete in the US.

For the Japanese importers, the weak yen is definitely a negative as the US dollar and Japanese yen variance, the yen being weak, increases import prices from the US and the EU.

Article:

Both private consumption and business investment are "picking up," while industrial production has shown "signs of picking up." Exports, meanwhile, are "steady."

Japan's slow but steady economic recovery from the pandemic has been supported by consumers spending more on services, dining out and taking trips, partly because of household savings accumulated during the pandemic. Companies have also been ramping up investment.

Ideas:
After two or three years of pandemic not so good consumer spending and business investments, maybe both consumer spending and business investment activities are making up for lost time.

Consumer spending might be making up for not much spending during the pandemic and or for example not going out to restaurants and so on. 

Household saving might have increased, but there has to be a balance between spending and savings for an economy to grow. while savings are good, it not always good for growth in the economy, as maybe there isn't enough consumer spending compared to household savings.

Its good that companies are increasing investments, as needed, but are they also increasing needed wage increases for the good of the economy overall.

Article:

The revival of inbound tourism has provided a boost to the economy as the yen's weakness against the U.S. dollar since last year has made Japan a cheaper destination.

The Cabinet Office maintained its assessment on the global economy, saying that it is "picking up despite weakness in some regions."

Ideas:

Inbound tourism or international tourists to Japan is increasing but it might not reach the level of 2019 but might be very close as the weak yen is good for tourists to Japan, as their purchasing power increases with a weak yen.

As China has now normalized its situation there are many Chinese tourists traveling to Japan, and the same with South Korean tourists taking advantage of the weak yen.

But Japan has to be very careful, as before the pandemic many Japanese service sector providers focused only on international tourists and when the pandemic hit, many of them either went out of business and or had to lay-off a lot of their workers.

The same thing happened in South Korea as some businesses became too dependent on international tourists.

The global economy seems to be steady at this point and should not be major concern for most Japanese exporters in the future.

Have a nice day and be safe!

Japan Price Increases: Updated Nov. 4, 2023

 Article Source:  https://mainichi.jp/english/articles/20230722/p2g/00m/0bu/026000c

Article:

TOKYO (Kyodo) -- Japanese consumers will have seen price hikes on 30,009 food and beverage products by October as retailers pass on higher costs to protect their profits, according to a credit research company.

The total, including the hikes in coming months, already eclipses the 2022 total of 25,768 items, Teikoku Databank Ltd. said in its report in mid-July.

Ideas:

In the past, before the pandemic, Japanese companies rarely passed on their higher costs as they just absorbed the costs and accepted lower profit margins.

But also in the past there probably wasn't much in terms of higher costs related to energy increases and or raw materials costs. 

But this is a different world we live in now and inflation is a global situation that is not going away any time soon.

Of course it possible that many of the price increase might not be felt or noticed by most consumers, but of course the lower income groups always feel them.

Article:

The company also maintained its forecast for the full year at around 35,000 items, saying October is expected to see the most price hikes.

The added burden on households has reduced purchasing power, making it increasingly unlikely companies will continue increasing prices at such a rapid pace as it will further dampen demand, it said.

Ideas:

Companies have to find a balance between passing on their costs and not reducing demand for their products because price increases.

Of course their are products that are necessities, meaning they are needed no matter what the price, but then there are products that are not needed so much and might be considered extras if we want and have the extra income for the products.

Of course inelastic demand products and elastic demand products, for the most part, are very much different.

Inelastic demand products, and companies, for the most part, can get away with price increases as customers will or have to continue to buy them despite the price increases.

But elastic demand products are much different as companies have to be careful about price increases as a elastic demand product if a price increase becomes too much a company might lose customers.

Article:

The company cited rises in electricity and labor costs, along with a weaker yen pushing up import prices, as factors that will lead to further price increases.

October will see price hikes for 3,716 items, including sausages and alcoholic beverages, up about 300 from the number announced at the end of June.

Ideas:

Electricity cost will probably continue to increase but not a a faster rate in the future. Labor cost increases might be good thing as an increase in wages might help consumer demand as they feel better about their wage increases and begin to spend more in the economy..

Import costs will continue to increase as the variance between the Japanese yen and the US dollar increased, which will increase import prices. 

Again, of course even though many product prices might be increased maybe some consumers might not even notice the price increases that much as inflation and price increases are very much as individual situation as it depends a lot on consumer needs and consumer tastes.

Article:

But the company said the monthly total could end at over 8,000 as more companies are likely to announce price changes.

It also expects intermittent price hikes between the yearend and the beginning of 2024.

The survey compiled pricing data from 105 listed and 90 non-listed companies in the food and beverage industry.

Ideas:

Again, of the 8,000 products that might have price increased how many products to customers actually buy in a day, a week, a month, and so on.

Most likely, as inflation as continued in Japan, many households or even many single households have not prioritized their daily and month buying needs and only buy what they need and maybe don't buy too much of what they don't need.

And then there the international tourists who come to Japan, and because the Japanese yen is weak, they have more purchasing power, and they can buy more than usual, and they probably don't see or feel the price increases too much compared to what the domestic consumer feels.

Have a nice day and be safe!

Japan Consumer Inflation: Updated Nov. 1, 2023.

 Article Source: https://mainichi.jp/english/articles/20230721/p2g/00m/0bu/012000c

Article:

TOKYO (Kyodo) -- Japan's consumer inflation accelerated to 3.3 percent in June from a year earlier, government data showed Friday, in a fresh sign of broadening price hikes that could fuel speculation of a policy tweak by the Bank of Japan.

The core consumer price index, excluding volatile fresh food items, remained above the BOJ's 2 percent target for the 15th month. The pace of increase accelerated from 3.2 percent in May as food and durable goods prices rose and utilities raised electricity charges.

Ideas:

Most likely the price hikes are related to companies passing-on their energy or material costs to the next in the supply and chain and not really relate increased consumer demand or spending.
While the Bank of Japan might want to keep inflation around 2 percent its not doing much to slow inflation down, as its taking a hands-off approach, for the most part, and letting inflation just run its course.

The Japanese government is trying to reduce home energy costs but the Bank of Japan has mostly taken an approach of just letting it be natural.

Article:

The figure boosted the likelihood of an upward revision to the BOJ's inflation outlook for the current fiscal year, with the central bank set to hold a two-day policy-setting meeting next week.

The core-core CPI, which strips away both energy and perishables, rose 4.2 percent in June, according to the Ministry of Internal Affairs and Communications, slowing from 4.3 percent in May but still showing persistent inflationary pressures.

Ideas:

Even at 4.2 percent, inflation might be affecting all households in Japan. But for sure the lower income groups are probably feeling the inflation pressure, as low-income groups have to spend more of their income on food that higher income groups.

Even if core inflation decreased from 4.3 to 4.2 most likely households didn't even notice the decrease as 4.3 to 4.2 is not that much of a decrease.

The Bank of Japan needs to be careful and not be too negative as negatives news can decrease consumer sentiment, consumer spending, and consumer demand in the economy, not to mention business sentiment too.

Article:

Among notable gainers, food prices surged 9.2 percent and durable goods jumped 6.7 percent.

The government has been reducing utility bills for households by lowering gasoline, gas and electricity prices. Without such subsidies, core CPI would have risen 4.3 percent, according to the ministry.

Ideas:

Food price increases at 9.2 percent might be at the price level that now even middle income groups might begin to feel the inflationary pressure, while its not going to affect the upper income groups too much yet.

Most likely the increase in durable goods might have been because of material costs needed to make the durable goods.

Its good that the Japanese government is trying to reduce household energy costs but at the same time what about the suppliers and wholesalers who have to buy and sell the energy in Japan. Are they getting subsidies too.

Article:

Energy prices dropped 6.6 percent from a year earlier, helped by the government's support programs and stabilizing crude oil markets.

The government on Thursday lifted its fiscal 2023 inflation outlook from 1.7 percent to 2.6 percent, well above the BOJ's target for stable inflation.

Ideas:

Global energy prices might be decreasing but are they increasing fast enough for the good of the economy and households. 

An outlook is nothing but a "best guess" about the future and it could be higher or lower depending on future information and new data.

But even at 2.6 percent, Japan in inflation is still lower than what the EU and the US is experiencing at this time.

The problem or challenge of course is Japan, for a long time, was in a deflation or stagnation period and now at 2.6 percent that might seem extreme to many in Japan.

Have a nice day and be safe!

Japan Inflation Estimate: Updated Nov. 1, 2023

 Article Source:  https://mainichi.jp/english/articles/20230720/p2g/00m/0bu/040000c

Article:

TOKYO (Kyodo) -- Consumer inflation in Japan will accelerate faster than previously estimated to 2.6 percent in the fiscal year ending next March, the Cabinet Office said Thursday, well above the Bank of Japan's target.

The government had estimated that consumer prices, which include energy and volatile fresh food items, would rise 1.7 percent in fiscal 2023. For fiscal 2024, prices are estimated to gain 1.9 percent.

Ideas:

Consumer inflation, off the most part, is an individual situation as all consumer don't buy the same products or use the same services. For some consumers inflation might be a major challenge while for some consumers inflation might not be a concern.

Consumer inflation at 2.6 percent might be a major challenge for the lower income groups but hardly noticeable for the higher income groups.

It should be remembered, that maybe in 2020, 2021, and 2022, inflation increased so even if inflation increased  just 1.7 or 1.9 percent in 2023, consumers have seen inflation increase many times the past few years.

Article:

The economic outlook for fiscal 2023, meanwhile, has been downgraded by the government amid slowing export growth. Japan's real gross domestic product is now forecast to grow 1.3 percent, instead of the 1.5 percent projected in January.

The revised forecasts were presented at a meeting of the Council on Economic and Fiscal Policy on Thursday as its members debated a budget framework for the next fiscal year.

Ideas:

Even if the Japanese economy only grows 1.3 percent instead of 1.5 percent, that is still good growth for Japan, as GDP growth in the past sometimes doesn't even reach 1.0 percent.

Exports are a major economic driver of the Japanese economy, meaning exports are very important for economic growth in Japan.

The major challenge for Japan and exports is China at this time, as exports to the US are strong due to demand for Japanese cars.

But China, again, has it own economic challenges which might be constraining exports to China.

Article:

Aggressive interest rate hikes by major central banks in the United States and Europe are threatening to curb demand for Japanese products.

A growing number of Japanese firms have been passing on higher import costs to consumers and raising wages to help cope with the rising prices of everyday goods. Private consumption and capital spending, key components of domestic demand, have been relatively resilient.

Ideas:

An increase in interest rates might be a positive or even a negative depending on the situation. In general, higher interest rates might constrain or depress spending in an economy including foreign products such as Japanese cars.

But at the same time, the variance between the US exchange rate and the Japanese yen, exchange rate. make the yen, weak, which in theory makes it better for Japanese exporters to sell their products at a higher price in the US. 

Japan, South Korea, and China all compete in the US market as they all make similar types of products.

The challenges is if the yen, the exchange rate gets too weak, it cuts into Japanese exporter competitiveness related to cheaper South Korean or Chinese products, such as cars.

Article:

The expected rise in consumer prices, including for perishable food items, follows the 3.2 percent jump seen in fiscal 2022, the biggest increase since fiscal 1990.

Prime Minister Fumio Kishida, who is pursuing an economic agenda of wealth redistribution and increased growth, said the economy has seen positive developments, such as pay hikes and an increased appetite for investment among corporate sector actors.

Ideas:

Add in the 3.2 percent increase in 2022 and the 1.9/1.7 percent increase in 2023, makes it even more challenges for Japanese consumers.

But inflation is not always a bad thing as inflation sometimes indicates more economic activity and more spending in an economy.

But in this case, it might just be companies passing-on their raw material and energy costs to the next in the supply chain, including the final customer.

Wages might have increased but are the enough for consumer to feel good enough to continue spend despite the inflation challenges.

Companies usually don't invest or spend unless they feel the economic conditions are in their favor in the future. 

Article:

"We need to pay due attention to the impact (of inflation) on real household incomes. Taking into account the viewpoint of ordinary people, the government will carefully look at economic and price conditions," Kishida told the government panel meeting at his office.

Entrenched inflation without robust wage growth would deal a significant blow to households, and real wages have been falling for months in Japan.

Ideas:

Inflation has been increasing, for the most part, since 2020, but it seems the Japanese government is just now beginning to see it can be a major challenge for Japanese households.

The BOJ or the Bank of Japan, has taken a hands-off approach to inflation compared to what the US and EU are doing. The BOJ has basically just let inflation runs it course and always saying inflation is only temporary.

Even though its been reported that companies gave an average of 3+ percent in wage increases that might not be enough to overcome the consistent inflation challenges in Japan.

And not all companies gave wage increases as many small and medium sized companies might not have been able to increase wages.

Article:

Still, Japanese firms agreed to an average pay hike of 3.58 percent at annual negotiations with labor unions, the best outcome in three decades.

The BOJ, for its part, has not budged over its stance of maintaining ultralow rates despite quickening inflation, as it seeks to ensure pay hikes continue so that it can attain its 2 percent inflation target stably.

Ideas:

Even at 3.58 percent in pay hikes, while better than nothing, its maybe not good enough to create a better consumer spending situation for consumers as maybe the 3.58 barely covers inflation and or maybe doesn't cover most of inflation.

And then again, many companies did give wage increases but many companies didn't give wage increases which is going go create a wage-income inequality situation in Japan of haves and have-nots eventually.

The BOJ strategy and the US strategy would seem to be in direct conflict as the US Federal Reserve are using what they think is best of each economy. 

The major challenge of course is that the variance in key rates have a major affect on the exchange rate,which causes the Japanese yen to be weak and US dollar strong.

Of course this could be the strategy of the BOJ in that a weak yen is good for Japanese exporters as they can get more for the products, such as cars they sell in the US.

But its a major challenge for the Japanese domestic economy too has it causes imports from the US to be more expensive.

Article:

The central bank is scheduled to update its economic and price outlooks when it holds a two-day policy meeting next week. The core consumer price index, which excludes volatile fresh food items, is forecast to gain 1.8 percent in fiscal 2023 and then 2.0 percent the year after.

The BOJ's fiscal 2023 forecast as of April is more conservative than the average 2.6 percent increase expected by private-sector economists, who were polled by the Japan Center for Economic Research.

Ideas:

Not all economic organizations have the same estimates on what is going to happen in the future. An economic outlook, or estimate, is nothing more than a "guess" as to what is going to happen in future. 

And many organizations, including the BOJ, always come back and revise up or down their estimates as they get new new information and new data.

So all outlooks should be take with a grain of salt, meaning again, they are just a guess and probably will be revised up or down in the future.

Again the core consume index is just a number and it could affect consumers or not affect consumers depending on their economic situation.

Article:

But they expect core CPI to rise 1.67 percent in fiscal 2024, slower than expected by the central bank.

Resource-scarce Japan has been grappling with higher energy and raw material costs, magnified by a sharp drop in the yen.

Ideas:
A CPI increase of 1.67 might not seem like much but if you add in all of the increases since 2020 that could be close to 4 percent inflation in Japan since 2020.

Inflation might actually be decreasing but the challenge is when can consumers begin to not feel the affects of inflation or see continuous month after month.

Japan, as a resource-poor country, is always going to have import challenges with maybe raw material costs and energy costs, and if the Japanese yen remains weak it means imports prices are going to continue to be higher than normal.

The key might be for Japan and the US to enter into some kind of free/fair trade agreement that sets prices at a certain despite the exchange rate fluctuations. 

Of course some say that is like a fixed exchange rate instead of the global standard of a floating exchange rate.

Article:

 The government has been reducing utility bills for households by lowering electricity, gasoline and kerosene prices, a move likely to curb CPI by around 0.5 percentage point in fiscal 2023, according to the government.

Private sector members of the government panel proposed that such subsidies should be phased out or scrapped. They also said that there should be more focus on supporting low-income families hit hardest by rising prices as the government shifts from COVID-era, crisis-mode spending to a more "ordinary" budgetary policy regime.

Ideas:

Its good that the Japanese government has been implementing some kind of price controls on home energy costs, but the challenge is always when and how to do it. Too much as it might have an affect on the market economy. Too little and it might have any affect on households at all.

And then there are the wholesalers of energy, what is the government doing to help them as their price keep going up but they have to reduce their sales to help households.

Of course there is always talk about when and how to end the subsidies, but the low-income groups, even in Japan need help as food inflation is still a major challenge for them.

This is a little ahead of this article but Prime Minister Kishida has proposed a 40,000 yen subsidy tax cut for citizens in Japan, which could really help low income families. 

Have a nice day and be safe!