Japan on Standby: Updated Jan. 2, 2024

 

Japan 'on standby' to take all possible steps amid yen decline

Article Source: https://mainichi.jp/english/articles/20231101/p2g/00m/0bu/009000c

Ideas:
Why would there be accelerated yen selling? Most likely, companies and some individuals are trying to take advantage of the weak yen against the US dollar.

There is probably no way to reduce the yen buying frenzy but that can probably slow it down with some steps in the currency market as needed.

Monetary, for now, most likely will continue in 2024 but the Bank of Japan has been communicating that sometime in 2024 they might begin to change policies.

 Will financial markets and companies need to stay the course as maybe inflation will continue in 2024 and need to protect themselves against continued inflation.

Excessive volatility is not the best option as companies and financial markets prefer currencies to increase or decrease gradually and not wide swings either way.

If a company knows or can determine that the yen is going to be weak or weaker for a  quarter or longer, they can make plans to protect their investments or buying as needed.

But if the currency goes through wide swings in either direction, its hard for a company to prepare as needed.

Japanese authorities don't want to cause any surprises in what they are going to do, so they always signal ahead of time what is going to happen.

But the Bank of Japan has to be very careful, as a weak yen seems to be very good for foreign tourism and very good for Japanese exporters. If they intervene too much the weak yen might not be as weak as needed to increase foreign tourism and increase the profits of Japanese exporters.

And of course, on the opposite side, a weak yen is not so good for Japanese importers as it increases the prices of imports.

The Bank of Japan doesn't seem to mind the Japanese yen from moving in either way, but maybe they have a limit on excessive movements either way.

People's lives have been affected because of inflation and the weak yen for the good part of two years, but the Bank of Japan, seems to just let inflation run its course and for the weak yen, maybe they feel its good for the economy, overall, as long as it doesn't become too excessive.

But again, the weak yen is not so good for the Japanese domestic economy, as Japan is a resource-poor economy, and needs to import much of what it needs, and the weak yen makes imports more expensive for importers and or wholesalers, and then whomever is next in the supply chain including the final retail customer.

If the Bank of Japan has been concerned about the weak yen, and the difference between the Japanese yen and the US dollar, it hasn't really done much related to the difference between the two.

The Bank of Japan has to be very careful about intervening in the currency market, as they don't want to be seen being a currency manipulator, so maybe the reason they haven't done much intervention, and they have just let the Japanese currency, the Japanese yen, just be natural.

The spring of 2024 could be very important for the Japanese economy as the Bank of Japan has signaled it might change is ultralow policy, but that might depend on what inflation does and what companies to in April with wage increases.

Have a nice day and be safe!

Toyota Sales Growth: Updated Jan,. 1, 2024

 

Toyota posts record global output, sales in April-Sept. period

Article Source: https://mainichi.jp/english/articles/20231030/p2g/00m/0bu/027000c

Ideas:

Its amazing that just recently, the last two years, there were massive chip shortages related to anything that needed chips. 

But at the same time, the record output has to be thought of a making making up for lost production the last two years, because of the chip shortage.

But its no small feat that Toyota has been able to recover so quickly with significant sales and record output.

It just shows the global economy is doing OK and not headed for any kind of recession or even a slowdown or a pause due to inflation.

At one time, talking to Japanese citizens, they said, in Japan, in 2021, for example, it took 6 months to get a new Japanese car, due to chip shortage.

If Toyota saw such improved production and maybe sales figures too, what about the other major brands such as all of the European brands globally.

If the global economy continues to improve, or even stay on its current course, no doubt Toyota and other brands are going to have  record year.

But there is no certainty, exactly moving into 2024. There are no real signs of a recession or a slowdown but March is a long ways away from today.

North America and Japan seem to be doing just find with no slowdown indicated in the future. But China is in a different situation, with its domestic economy in a period of transformation along with some other domestic challenges. 

The Chinese car makers are headed in the right direction, and like other Chinese products over the past decade, they have caught up and maybe even passed some Japanese and South Korean brands. 

Again, part of the record sales might have been latent demand and or latent sales meaning because the past chip shortages maybe customers were just waiting until the pandemic and the chip shortages had passed before they decided to get a new car.

But whatever the reasons for the record output and record sales Toyota looks like its going to have a record fiscal year when it end at the end of March.

All car makers, not just Toyota, need to understand that maybe the cars that use gasoline might be extinct eventually. How long is it going to take before there are no longer any gasoline cars produced and sold? Who know exactly. It will depend on demand and if car companies can produce EV cars at a prices that the average family can buy one.

But of course its not going to be in 2024, but for sure more EV cars will be produced and sold than in 2023 as that appears to be the future,

Again, like any product, being able to produce a quality product at a price that the average household can afford. And not just regular sales, as many customers in Japan are now using a hybrid leasing system that lets them have a car for two or three years, without actually buying a new car.

Its interesting that Japan has eight major car makers, while the US has only maybe 3 major car makers. Of course there are other brands in the US, that produce and sell in the US including Toyota, which has many plants all over the US.

But back to idea of Japan having eight major automakers, might be an indication of cooperation more than competition among the eight car makers, and or they all have significant niches that they fill and don't compete exactly with each other.

Mitsubishi and the Chinese market it understandable and not unexpected as the competition with the new Chinese brands and maybe the fact that Mitsubishi couldn't meet the needs of Chinese customers, so it might have been a wise move to exit the market at this time.

It seems Japanese cars in the US, and maybe globally, has seen some kind of resurgence since the pandemic has come and gone and also, at the same time, as inflation in the US is decreasing and interest rates haven't been increased recently, which might be good for Japanese car customers and maybe other brands too.

However, there is the ideas of the weak yen, and Japanese exports, if any Japanese cars are exported to the US, they might be subject to higher prices, but as there are many Japanese cars now produced in the US they are not subject to the weak yen, which makes more affordable to US and Canadian customers.

Japan carmakers were smart to build car plants in the US and Canada, and Mexico, as a way to improve their supply chains and get past the weak yen situation.

Have a nice day and be safe!

Japan Economic View: Updated Dec. 31, 2023.

 

Japan views economy on moderate recovery path, warns of Mideast risks

Article Source: https://mainichi.jp/english/articles/20231030/p2g/00m/0bu/045000c

Ideas:

"Recovering at a moderate pace" is a polite expression and or it is what it is, meaning the Japanese economy is not yet where it should be but headed in the right direction.

Anytime there are global risks such as the Ukraine situation and now the Mideast situation, there are only gong to be global risks that might disrupt supply chains, export shipments, oil/energy shipments and so on..

What the Japanese government doesn't want to do it give a report that might disrupt or shock the financial and stock markets. So they always tend to keep the reports somewhat positive. 

Companies might view business conditions as "recovering moderately, and that, again, is a  positive view and it could be somewhat different depending on company to company.

Public investment is never a liner or straight line of investment, as there are going to be months of a lot of investment and month of less investment depending on the situation.

Again, a "moderate recovery" might be true for some or many, but the Japanese economy, like any economy, has many sectors and maybe not all companies and sectors are going to improve or grow exactly the same.

Monetary tightening in the US for example, at this time, seems to have taken a pause, as the US economy and inflation in particular seems to be decreasing and the US Federal Reserve, the US central bank, has not increase the rate recently, and for 2024 they have suggested, as the US economy continues to improve, there might be three rate decreases.

Inflation or price increases, continue to cause stress for Japanese households and companies, with maybe no end in sight as some suggest 2024 could be more of the same.

The Middle East situation, unfortunately, is an ongoing political risk, that never seems to resolve itself. 

As far a fluctuations in the financial markets are concerned, there are positives and negatives to fluctuation depending on the market and the intensity of the fluctuations.

The Japanese yen at 150 is a very weak yen, but at the same time, there are positives and negatives to a weak yen.

For Japanese export companies a weak yen helps Japanese companies can get more profits for their Japanese products. But at the same time, if Japanese products become too expensive, compared to South Korean products or Chinese products, there is the chance that they could lose their competitive edge.

Also, as the Japanese yen is weak, it a strong incentive for foreign tourists to go to Japan and they can spend more as their purchasing power increases significantly. 

But for Japanese importers, the weak yen increases import prices significantly which also means maybe households have to pay more as importers and wholesalers, and companies  pass-on their increase costs to the next in the supply chain.

Private consumption, for consumer spending, or household spending, however you want to describe is maybe 50 percent of Japan's GDP and or a little more, compared to the US where consumer spending is maybe 60 percent or more.  But, overall, consumer spending has not reached the level that the Bank of Japan or the Japanese government would like to see, as Japanese consumers, for the most part, are more savers than spenders.

Business investment is never a monthly situation as its usually more of quarterly situation as to when companies decide to invest.

Japanese exports are a major economic driver, meaning it helps the Japanese economy grow significantly, even though Japanese exports might only be 20 percent of Japan's GDP.

Consumer spending might be related, still, to latent spending, meaning Japanese consumers during the pandemic reduced their spending or delayed their spending until the pandemic ended. 

And for the most part, inflation might not be that much of a stress for some in the Japanese economy, as maybe they might not feel the affects of inflation and or they don't notice the increase in prices of what they buy each day, each week or each month.

The final economic package, is never what was intended initially, as different factions in the Japanese diet, or parliament, will change the what was intended, to meet the demands of their constituents and or group interests.

For example, the tax cut and cash handout, as intended initially probably will be much less as the factions work on it.

The global economy, at this time has many challenges, from the Ukraine/Russia situation, the Middle East situation, and closer to Japan, the Chinese economy is going through some major transformations or changes along with some significant domestic challenges.

The US economy, as this time, appears to be headed for a "soft landing," meaning its not going to head into a recession, and its moving out of its inflation situation.

Have a nice day and be safe!

 

Japanese Woman and Customers: Updated Dec. 30, 2023

 

Over 50% of Japanese women willing to work say they've been harassed by customers: poll

Article Source: https://mainichi.jp/english/articles/20231026/p2a/00m/0na/012000c

Article:

TOKYO -- More than half of women willing to work in Japan have previously been victims of "customer harassment," in which customers and clients take advantage of their superior position to demand excessive service or make malicious complaints, a research institute has found.

Shufu Job Soken, a private research institute based in Tokyo's Shinjuku Ward, conducted an online survey from Sept. 12 to 19 mainly among homemakers who are motivated to work. The poll asked them about customer harassment, which was added to the criteria for recognizing a work-related illness or injury from this year. Responses were received from 637 women.

When asked how often they had experienced customer harassment, 29.5% said "once" and 22.1% said "several times," indicating more than 50% of the respondents had experienced such harassment.

Ideas:

Its very unfortunate that Japanese society, like many societies today, have "customer harassment" problems. 

Its one thing to be upset about a company's service policies but it another thing completely to think the people trying to help when you call and you take out your personal frustrations on the people trying help you or explain about the policies which they didn't create. 

These day people its easy to take out your frustrations on people either at a counter or on the phone, when they have nothing to do with the policies themselves.

Article:

About 70% of the respondents cited harassment such as being yelled at or otherwise verbally abused, being questioned persistently for a long time, facing violent language from customers, and having unreasonable demands made upon them.

One respondent commented, "Sometimes the line between what is acceptable and what is not is unclear," while another said, "There are cases where even legitimate complaints are treated as customer harassment," leaving some people struggling to classify the behavior. At the same time, there was also a woman who personally learned about such harassment and defended herself against it, such as by "taking a firm stand against false accusations." Another commented that the long-used Japanese phrase "the customer is god" is misinterpreted and leads to harassment.

Ideas:

Its unfortunate, again, that customers today don't have any manners. Of course 99 percent of customers have manners and would never do it, but its the 1% percent how cause all of the problems in society, and makes problems for working woman who just want to make a living.

Japan many decades ago, and yes maybe decades, was a very polite society, but some customers and people have misunderstood the concept of "the customer is god", thinking they have all the power and the clerk, sales clerk, store employee or company representative is not a human being with feelings and a heart.

Where has common decency or human dignity gone? What has happened to fairness in society and everyone treating each other with respect even though you have problem with a product or service or want to return a product etc.

Article:

The institute pointed out that "It is necessary to base the relationship on mutual respect between the provider and the receiver of products and services, rather than a hierarchical relationship with the customer as the superior."

Ideas:

No wonder Japan has a labor shortage problem with many Japanese women might have experienced such behavior from customers and even from higher-ups with think they are better than the lowly ranked service employee at a company.

The customers is not the king and they don't have all the power. Yes, of course, have good customer service that treats the customer correctly, but at the same time, the customers too, has a responsibility to be polite and civil in society.

Unfortunately, this kind of behavior is common among some higher income people in Japan, who think they are better than lower income group people.

But its not all higher income people as most are very polite people, but there are enough of them to think rich people in Japan only care and think about themselves, like other some other rich people around world.

Have a nice day and be safe!

Japan Tax Plan: Updated Dec. 29, 2023

 

Japan gov't floats 40,000 yen income tax cut a year to ease inflation pain

Article Source: https://mainichi.jp/english/articles/20231024/p2g/00m/0na/043000c

Article:

TOKYO (Kyodo) -- The Japanese government is considering an income tax cut of 40,000 yen ($268) per person and cash handouts of 70,000 yen to low-income households as part of temporary inflation-relief measures, sources familiar with the plan said Tuesday.

Prime Minister Fumio Kishida, who places priority on wealth redistribution, has instructed ruling coalition executives to work out details of the economic package that he hopes to formalize on Nov. 2, including how to realize the income tax cut.

Legislation will be required to change the current tax system, making it likely that Japanese households, already reeling from the rising costs of living, will start feeling the benefits around next summer at the earliest.

Ideas:

A tax cut of 40,000 yen and a cash handout of 70,000 sounds very good, but is there is always the idea of how the Japanese government is going to pay for the extra funding, as the Japanese government already has one of the largest, if not the largest debt to GDP ratio among advanced economies.

Just what is wealth redistribution? Does it mean getting more extra income for workers, is it reducing income inequality in the Japanese economy, does it mean giving incentives to companies who might be sitting on a lot of extra cash, to use it for their workers.

Both the tax cut and cash handout sound good, but it is going to be a onetime situation or is it going to be yearly. And then are there going to be limitations, regarding who will get it and who will not get it depending on income levels.

And then there is the idea of how will it get into the hands of those who need it. For example, will families be able to apply quickly and easily without a lot of government red tape, or a lot of documents, for example that need to be completed before families can get the handouts or tax breaks.

Article:

The cash payouts could begin by the end of the current fiscal year ending March, the sources said.

Higher fuel and raw material import costs have driven resource-scarce Japan's inflation rate higher, with its impact exacerbated by a weaker yen.

Kishida has vowed to put the economy before anything else in his policy speech as an extraordinary Diet session got under way. His increased focus on the economy comes as he is scrambling to stem a downward spiral in public support, partly seen in the mixed results of parliamentary by-elections on Sunday.

Ideas:

Anytime a government says they are going to do something, eventually what is finally decided on is not the same as what they wanted to planned as compromise on certain points could result in something much different.

For example the tax handout of 40,000 could be much less and the 70,000 cash handout could also be much less when all is done and said.

But the Japanese government needs to be very careful, as just using and giving handouts and tax cuts, might sound very good, but there are always going to be, in every society, those who try to take advantage of the system, such as cheating on documents etc. as a way to get more.

Ans then there is the idea of interfering in the normal business and economic activity as what will this do the normal market functions of an economy.

But at the same time, the Northern European countries seems to be doing just fine with a system that takes care of its citizens and the economies are doing just fine.

Article:

To return part of an increase in tax revenue to the Japanese people, 40,000 yen has emerged as an option within the government, according to the sources.

Japan has seen record-high tax revenue for the past three years through fiscal 2022. Of the total, income tax revenue grew by around 3 trillion yen from fiscal 2020.

The ruling coalition of the Liberal Democratic Party and its junior coalition partner, Komeito, are expected to decide how long the tax cut should last. Yoichi Miyazawa, who heads the LDP's tax reform panel, has said one year would be "common sense."

Ideas:

Just how long the tax cut could last, meaning the ruling party will negotiate how much and when families can get the tax cuts, and maybe there might be more than one tax cut in a year or maybe even each year.

One year might seem like "common sense" but maybe the lower income groups need it for more than one year.

And or what about the 70 percent who don't work for large companies and didn't get a pay increase like those in big companies did. Are they maybe going to be eligible for multi year tax cuts.

Again, just how did the Japanese government come up with a tax cut of 40,000? Why not 50,000 or even 30,000.What was the basis for the 40,000 yen figure?

Article:

Komeito chief Natsuo Yamaguchi has said over 20,000 yen could be one target if the government decides to deduct a fixed amount from tax payments.

Another option to reduce income tax is to set a specific deduction rate, though it would benefit high-income earners more because tax burdens increase according to income levels.

Ideas:

And here we go, already in the article the 40,000 might be reduced to 20,000, through some other means such as deductions  fixed amounts.

If word got out, like in other countries, that higher income groups might benefit more than lower income groups that might not sit well with voters in coming elections.

Some might say, the higher income groups already are advantaged with higher incomes, and the amount of tax they pay more than makes up for the income they get.

Article:

The envisaged package would cushion the negative impact of rising prices on households and put the economy on a longer-term growth path.

The government is considering extending existing subsidies to lower gasoline prices and reduce household utility bills from the end of the year to next April.

Ideas:

At the same time, for the most part, the higher income groups might not even feel or notice the continued inflation in the Japanese economy, as maybe the lower income, feel the continued inflation and need the cash handout and the tax cut more than the higher income groups.

But will the cash handout and tax cuts really "put the economy on a longer term growth path'?

The answer is very complicated and maybe a one time cash handout and or tax cut is not going to be enough, as maybe the cash handout only lasts at the most one month and the tax cut too is too much or too short to have any real significant effects on economic growth.

Japan, for the most part, needs more innovation and improved overall per capita productivity for any real economic growth to occur.

Have a nice day and be safe!

Japan IMF Projections: Updated Dec. 28, 2023.

 

IMF projects Japan's GDP to fall to world's 4th in 2023 after Germany

Article source: https://mainichi.jp/english/articles/20231024/p2g/00m/0bu/001000c

Article:

WASHINGTON (Kyodo) -- Japan's nominal gross domestic product in 2023 is expected to slip from third to fourth in the world on a U.S. dollar basis, to be overtaken by Germany, on the back of the yen's depreciation, recent International Monetary Fund projections showed.

As the nominal GDP figure is impacted by inflation, Japan's expected fall from the No. 3 spot, which it has held for more than a decade, is also believed to reflect higher price increases in Germany than in Japan.

The IMF's projections for the period through 2028 say that India, which has surpassed China to become the world's most populous nation with more than 1.4 billion people, is likely to have a larger GDP than Japan in 2026.

Ideas:

Japan for a very far time, kept the number 3 slot related to GDP, but now, maybe because of inflation and also because of the lack of wage increases, there might be less per capita consumer spending in Japan compared to Germany.

I doubt that many Japanese citizens are worried about Japan moving from 3 to 4 and maybe it doesn't really impact their daily lives. And that is the point, all of these economic indicators, while good to look and use them as needed, the average Japanese citizen could care less about indicators and they only think about their daily lives.

The prices increases might be related to the fact, that Germany is a member of the EU and as such the EU Central Bank, like the US Federal Reserve has been increasing the key rate over the past few years, which makes everything more expensive, while the Bank of Japan has not increased the rate, keeping its ultralow policy in place.

Article:

While Japan is expected to be the world's fifth-largest economy between 2026 and 2028, India's GDP is projected to rank fourth in 2026 and third in 2027.

In 1968, Japan eclipsed West Germany in terms of gross national product, also known as GNP, which was the main indicator at the time, and became the world's second-largest economy after the United States.

Japan held the position until it was overtaken by China in 2010, falling to third place.

Ideas:

Part of the challenge is Japan's low birthrate, which constrain the economy, meaning every year there is less and less economic activity, and of course Japan's ageing population, which might mean less economic activity too.

It has been suggested, that Japan actually grew too fast in the 60's, 70's and 80's and didn't really lay the ground work for solid economic growth in the future. 

The same can be said that maybe South Korea grew too fast in the 70's, 80's and 90's also didn't lay the ground work for future economic growth.

Of course Taiwan, Singapore, Thailand and South Korea all followed the Japanese model for economic growth by growing exports and market share but not really thinking about what do to after 10, 20, 30 years down the road.

Unfortunately, it seems to be inevitable that Japan is going to slip even further as it population doesn't improve and or even if Japan doesn't improve its productivity per capita.

Article:

Regardless of foreign exchange rates, which have a significant influence on GDP, Japan has seen a long period of low growth. Germany's population is about two-thirds of Japan's, but the growth gap between the two countries has been narrowing in recent years.

According to the IMF estimates, Japan's nominal GDP is set to be around $4.23 trillion in 2023, down 0.2 percent from the previous year, compared with Germany's $4.43 trillion, up 8.4 percent.

Ideas:

Unfortunately Japan per capita productivity level is one of the lowest of the advanced economies, and maybe the large Japanese companies are actually too large to innovate or change, which is actually a major challenge for any large company globally.

The low growth period, again, as suggested by some, might have been related to Japan growing too fast and didn't really paying attention to what is/was needed for 30 years down the road. 

But now, while Japan might see the problem, again, companies are reluctant to change, it costs too much, and or takes too long for any innovation or transformation.

Some might say, its OK, if we slip in the GDP race, as that its really not important to our daily lives, Maybe yes and maybe no, but GDP economic growth is still an important economic indicator to see what might be happening in an economy.

Article:

The dollar has recently traded at around 150 yen, compared with an average in the mid-131 yen range as traded during Tokyo market hours in 2022, according to Bank of Japan data. The yen's sharp fall has been driven by the prospect of a further widening in the interest rate difference between Japan and the United States.

Meanwhile, the exchange rate of the euro against the dollar has not changed as much as the yen.

Also looking at monthly inflation rates, Japan's consumer price index has generally been up by around 3 percent year-on-year. But the inflation rate in Germany was about 9 percent at the beginning of this year, before gradually slowing down and declining to the 4 percent range in September.

Ideas:

That the reason the euro against the US dollar hasn't change much, or less or no variance, is because both the US Federal Reserve and the EU central bank increased the key interest rate almost simultaneously, while the Bank of Japan has kept its key rate and zero or less, which has widened the gap between the US and the EU and the Japanese yen.

Japan's inflation rate, as suggested at 3 percent, was much less than other countries, such as the US at around 6 percent and Germany at 9 percent, so maybe because the Japan inflation rate was much lower, the Bank of Japan felt it didn't need to intervene in the Japanese economy like the US central bank did and the EU central bank did.

Some have suggested that Japan will continue to see increased inflation even in 2024 as maybe the Bank of Japan is not going to really do much about inflation and maybe even keep its ultralow rate.

If the Japanese government is smart, it will suggest to the Bank of Japan to keep the rate low and make sure the yen remains weak, as it its a major economic driver for foreign tourists entering Japan and spending a lot.

A weak yen also helps Japanese export companies as they get more for their products in overseas markets.

Have a nice day and be safe! 

Bank of Japan Regional Upgrade: Updated Dec. 27, 2023

 

Bank of Japan upgrades 6 of 9 regional economies on resilient domestic demand

Article Source: https://mainichi.jp/english/articles/20231019/p2g/00m/0bu/037000c

Article:

TOKYO (Kyodo) -- The Bank of Japan on Thursday upgraded its economic views on six of the nation's nine regions, helped by strength in domestic demand despite inflation and a revival of inbound tourism.

The Kanto-Koshinetsu area centering on Tokyo is among the six that saw an upgrade. The assessments were retained for the remaining three -- Tokai, where Toyota Motor Corp. is headquartered, the Kinki region that includes Osaka and Kyoto, and Kyushu-Okinawa.

"All nine regions reported that their respective economies, despite being affected by a slowdown in the pace of recovery in overseas economies and by price rises, had been either picking up or recovering moderately," the BOJ said in its quarterly Sakura report.

Ideas:

Not all regions are the same, as not companies or sectors are the same. Of course, usually, the major metropolitan areas see the best economic growth, as maybe there are more companies and economic activities in the metro areas.

But maybe Tokai, with Toyota having supply challenges, they might have been slightly down this time around.

"Picking up" moderately, is a polite way of saying we are still coming out of the pandemic, and are still recovering from supply slowdowns, along with the possibility of overseas demand being less than what is/was expected.

Price increases might not be the same in each region as maybe the major metro areas might be seeing the largest prices increases.

At same time, even the Osaka/Kyoto areas, might not have the exact price increases that the Tokyo area has, even though the Osaka/Kyoto are is a major metropolitan area.

Article:

The survey pointed to diverging spending behaviors. Private consumption has been supported by pent-up demand for services after the removal of antivirus curbs, but consumers are increasingly looking for lower-priced daily necessities.

The upgrades also came as Japanese companies adopt bullish capital spending plans to keep pace with decarbonization and address a deepening labor crunch. Production has been underpinned by robust auto exports as parts shortages have eased.

Ideas:
As inflation continues in Japan, maybe after a pent-up spending period, consumers are now facing reality that inflation is not decreasing, and might be in Japan for sometime, and as such Japanese consumers looking for sales, bargains, and maybe substitutes for what they normally buy.

Decarbonization is becoming more of reality as companies try to find ways to reduce their carbon footprint, but it takes time and it can cost a lot to transform.

The labor challenge in Japan is something that was known years before, but most companies seemed to either ignore the problem and or didn't know what do to about it.

And then there is the idea that younger workers today, and all workers in general, want a better work/life experience and maybe they are not willing to do the long work hours that was/is common in Japan. 

As such maybe some younger workers are shunning some types of work and only looking for what the really want.

Japanese exports are a major economic driver as it might affect thousands of companies, such as one car company might have thousands of unique suppliers for its cars.

Article:

"Polarization is more apparent. High-income consumers are opting for high-quality, high-priced products while those with lower incomes are shifting to (lower-priced) private brand and value packs," a supermarket operator was quoted as saying in the report.

A weaker yen has been driving up import costs, prompting a growing number of companies to pass the costs on to consumers by raising retail prices.

Ideas:

The trend is not only in Japan but in South Korea too. South Korean consumers are known for buying expensive duty free products just to show off and or to keep up with the Kims in Korean society.

But these days, because of high unemployment among young workers and continued inflation, its becoming less and less apparent and younger consumers are becoming more practical in their buying habits.

Of course, in the higher income groups in China, Japan, and South Korea, some might buy expensive products to show off or look rich, and unfortunately, even those in the lower income groups buy expensive products to look like they are rich.

Not long ago, Japanese companies were reluctant to increase retail prices, as they feared losing many of their customers. But now as company profit margins continue to decrease companies are increasing prices as way to maintain their profit margins.

Article:

But the BOJ, retaining its monetary easing, has taken the view that the key gauge of inflation staying above its 2 percent target for more than a year does not equal achievement of stable inflation.

The yen's depreciation, a byproduct of the central bank's dovish stance, has served as a boon to foreign tourists, with the total number of visitors recovering to close to pre-pandemic levels.

Ideas:

The Bank of Japan has taken a different approach to inflation than what the US Federal Reserve of the EU Central Bank has done, as maybe they have just let inflation be natural and run is course, as maybe they might be thinking increasing the key interest rate might be more harm than good for the Japanese economy.

Inflation in Japan keeps increasing and it is well beyond to 2 percent level that the BOJ wants as inflation, are reported is high 4.1 percent in Japan now.

A weak Japanese yen has both positives negatives for the Japanese economy. As far as negatives go,  a weak yen or weaker yen increase imports prices, which of course is a negative for many in the Japanese domestic economy.

As far as positives go, a weak yen or weaker yen is a positive for Japanese exporters who can get more for their Japanese products in overseas markets. But Japan exporters need to be very careful as they compete, in most of the same products with Chinese and South Korean exporters, and as maybe Japanese products become too expensive, companies and consumers, like in the US might choose the South Korean or Chinese product, if the perceive the quality is the same but at a lower price.

And a weak yen is a boom for foreign tourist going to Japan, as their purchasing power has increased meaning they are able to spend more for what they need and want.

So what is the best choice for the BOJ? Keep the Japanese yen weak and or try to strengthen the yen for the good of the Japanese economy.

It seems like the BOJ, in not so said language is letting the Japanese yen remain weak as it might actually help the Japanese economy in the long run.

Article:

"With relatively limited price gains in Japan compared with other nations plus the effects of the weaker yen, average spending by inbound tourism is more than double the figure for domestic travelers," a retailer said.

The quarterly report is among the materials the BOJ will use to assess economic conditions when it holds a policy-setting meeting in late October.

Ideas:

Inflation in Japan seems to not be as high compared to other countries as that might be attributed to maybe not all companies have increased prices even though they might have been affected by inflation too.

Japanese domestic travelers might be constrained by the weak yen but is stronger overseas, which means they might not want to travel overseas because of the yen/dollar situation.

At the same time, even those Japanese travelers in Japan might feel their plans are constrained due to inflation and the higher domestic prices too.

Foreign tourists and become a major economic driver now for the Japanese economy, and if the BOJ were to force the Japanese yen to become stronger, spending among foreign tourists might decrease.

For the most part, the Bank of Japan, as usual, is not going to do anything too drastic that might upset the financial markets including the stock market.

Article;

Both the BOJ and economists see the sustainability of wage growth as key for Japan to ensure a virtuous cycle of price and wage hikes. The government is planning to draw up a fresh economic package to ease the pain of inflation felt by households.

Some BOJ members have recently grown more confident about the prospect of wage growth. Many companies expressed their willingness to go ahead with pay hikes in the next fiscal year, according to the latest report, though they also want to see how much bigger firms and competitors will increase pay.

Ideas:

For many years, if not decades, Japan was in a state of deflation, one reason was Japanese companies gave very few wage increases.

It has also been suggested that Japanese companies, after 2008, were sitting on a lot of cash and basically not giving their workers wage increases.

As result, consumer spending, in Japan, as been constrained by low wage increases and creeping inflation and the fact, that Japanese consumers are not the big spenders as US consumers are.

Inflation has been in Japan for sometime, but other than this or that, the Japanese government and the Bank of Japan has taken a hands-off approach and just letting inflation run is course in the Japanese economy.

Many companies are followers and not leaders. As such if they see other companies increasing wages, then they too will begin to increase wages.

Article:

The Japanese Trade Union Confederation known as Rengo said Thursday it decided to demand a pay hike of "5 percent or more," during wage negotiations with management for fiscal 2024.

It set a target of "around 5 percent" for the fiscal 2023 "shunto" negotiations, which ended up producing an average 3.58 percent hike, the largest gain in three decade.

Ideas:

In labor negotiations, or any negotiations, one group such as the trade union asks for higher wage increase, knowing full well it might not happen, and the other side offers a much lower wage increase, and of course the two sides eventually find an agreement to work with.

But in reality, for many large companies, even a 5 percent increase might not be that big of a challenge for them, but these days ,unfortunately,  they have to think of all "stakeholders" related to a company and not just the workers.

Also 70 percent of workers in Japan don't work for large companies as most work for small and medium sized companies, at maybe can't match wage increases of the large Japanese companies.

So in 2024 again, large company employees might get more wage increases, but at the same time, it possible the employees at small and medium sized companies might get something or nothing at all.

Which then brings about the haves and have nots in Japanese society which is going to increase the income inequality ratio or Gini coefficient ratio related to income levels in Japan.

Have a nice day and be safe!