Japan Core Consumer Prices: Updated Nov. 29, 2023.

 

Japan's core consumer prices in August rise 3.1% on year

Article Source: https://mainichi.jp/english/articles/20230922/p2g/00m/0bu/008000c

Article:

TOKYO (Kyodo) -- Core consumer prices in Japan increased 3.1 percent in August from a year earlier, remaining above the Bank of Japan's 2 percent inflation target, as surging food prices continued to add to overall inflationary pressures, government data showed Friday.

The core consumer price index, excluding volatile fresh food items, rose for the 24th straight month, as companies continued to pass higher production costs on to consumers. The gauge remained above the BOJ's 2 percent target for the 17th consecutive month.

Ideas:

Most central banks would like to see inflation between 2 and 4 percent as they think that is a manageable level. But maybe for some economies anything over 2 percent might be too much for some in an economy.

As food prices continue to increase, some consumers/households maybe will try to find substitutes or alternative to what they normally buy, if they can do it.

For many years, Japanese companies were reluctant to pass on their costs to the next in the supply chain and they felt they might lose too many customers.

But now, as all or most Japanese companies are passing on their costs, its now a common practice and now consumers see price increases in all things.

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The rate of increase in the key gauge of inflation was unchanged from July after energy prices dropped 9.8 percent from a year earlier, according to the Ministry of Internal Affairs and Communications.

Core-core CPI, which reflects the underlying inflationary trend by stripping away volatile energy and fresh food prices, rose 4.3 percent, with the rate of growth also unchanged from the previous month.

Ideas:

Energy prices might have decreased by 9.8 percent, but maybe for many companies and households its still too high, as energy prices have risen every month for two or three years.

The core-core CPI of 4.3 percent is above the norm of 4 percent that most central banks thinks is manageable or a level that the economy can handle.

The problem or challenge is what is the Bank of Japan going to do about inflation. For the most part, maybe the Bank of Japan's strategy, is just to let inflation be natural and let it run its course and even in the US and the US central Bank increasing the key rate, inflation hasn't really gone down that much.

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Food prices soared 9.2 percent as rising material and transportation costs pushed up prices of a wide range of items such as fried chicken and ice cream. Durable goods saw a 3.0 percent increase.

Accommodation fees jumped 18.1 percent as more people traveled during the summer holiday season after COVID-19-related restrictions were fully removed.

Ideas:

Food companies maybe had no choice but to pass-on their costs and maybe there suppliers related to raw materials and energy costs continue to increase.

Durable goods might have increased as maybe the cost of making the products increased due to the increase in steel and other materials saw increases over time.

Accommodation services providers were/are increasing their rates as they see demand increase and or they need/want to makeup for lost revenue during the pandemic period, when many accommodation service providers lost a lot of profits.

But at the same time, during peak travel sessions, such as the Obon season in Japan, accommodation service providers might have automatically increase prices due to significant increase in demand and the Japanese government reduced the pandemic restrictions.

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The inflationary pressure was somewhat moderated by the fall in energy prices stemming from government subsidies to reduce household utility bills.

The costs of electricity and city gas dropped 20.9 percent and 13.9 percent, respectively, thanks to government measures, while that of gasoline climbed 7.5 percent.

Ideas:

Inflationary pressures might have moderated somewhat but that doesn't mean inflation has decreased in Japan and maybe after 2 or 3 years of inflation, its still relative high.

Relatively high, meaning maybe for some income groups it not a big deal but for some income groups it might still be too high.

Its good that the Japanese government has used subsidies to try and reduce some energy costs for households, but what about for wholesale or energy companies that sell and bring the  energy to the Japanese domestic markets. Are they getting any benefit from the subsidies, and maybe they might need to pass-on their increased costs to the next in the supply chain.

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Rising prices continue to deal a blow to consumers in Japan where an increase in wages has not kept up with the soaring costs of goods and services.

The country's real wages fell for the 16th straight month in July, according to government data.

Ideas:

To be discussed later but a new Japan Times article in November talks about wage increase and companies.'

Wage increases that already taken place didn't really affect or help 70 percent of wage earners in Japan, as most wage earners don't work for large companies as most large companies and some medium sized companies gave wage increases of about 3.5 percent which was below the 4.3 core CPI inflation increase.

Real wages means wage with not inflation, so for example, wages might have increased about 3.5 percent while inflation increased 4.3 percent.

Have a nice day and be safe!