Bank of Japan upgrades 6 of 9 regional economies on resilient domestic demand
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!
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.