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!