Japan Government Report: Updated May 27, 2024.

 

Japan edging closer to ending deflation, pay hikes key: government paper

Article Source:  https://mainichi.jp/english/articles/20240213/p2g/00m/0bu/042000c

Ideas:

The idea that Japan is in a state of deflation might only be in the eye of the Bank of Japan and the Japanese government, as Japanese households and consumers might only see increased prices.

If you take real wages as the benchmark for deflation then yes, it might be correct as real wages keep decreasing while inflation keeps increasing.

But the average Japanese consumer or Japanese household doesn't think in economic terms they only think in how expensive everything has become and they could care less about economic indicators and such.

Yes, there might have been a time, when there was a period of deflation in the Japanese economy most likely due to decreased consumer or household demand and businesses were lowering their prices to keep customers and stay in business. 

But those days were long ago and not the past 5 or 10 years when inflation was the highlight of the Japanese economy.

And yes, since the Toyota wage negotiation incident around 2000 when they didn't increase wages and everyone else followed suit, wages and real wages are not increased very much.

Again, it's quite possible that wages for most workers in Japan have not increased since the the early 2000's as, again, most companies followed the Toyota example or no wage increases. 

And again, if you see real wages as the key indicator for deflation then yes, if wage increases. are not big enough to overcome inflation, then yes, there will be deflation again, in the Japanese economy.

But there is the ideas of constant inflation in the Japanese economy related to products and services then how then can you say there is real deflation in the Japanese economy.

Yes, the Japanese economy is not in a state of deflation even thought real wages keep decreasing and prices on most products in Japan keep increasing, so most likely Japan is in a state of inflation and not deflation.

But again, maybe the powers to be think of wages and real wages as the key indicator for the Japanese economy, and maybe to be fair, for good reason, as many if not most of Japanese workers haven't seen a wage increase for a very long time or maybe for some workers never.

Unfortunately, Japan, in terms of wages, is not even near the top or the top half of wages for OECD countries these days. Its been a long decline for when Japan was at the top in the large 80's but since then a slow decline in most things in Japan.

Japan is a resource-poor country and has to import much of what it needs. And of course the exchange rate between the US and Japan and Japan and the EU has made import prices even higher, which then means import companies pass-on their costs to the next in the supply chain and eventually the final consumer.

The services sector was hit hard by the pandemic and might be increasing prices as a way to makeup for the heavy losses during the pandemic.

At the same time, as Japan is facing labor shortages, service sector companies are increasing prices as a way to pay for increased wages to stay competitive with other sectors in Japan. 

Consumer spending or private consumption might take some time to see any real sustained changes as the mindsets of Japanese consumers have been conditioned to be weary about spending and for the most part, Japanese consumers are not big spenders like US consumers.

If for example, not all Japanese workers get wage increases and only the large company workers get wage increases that is still a large part of the Japanese economic workforce without any wage increases.

For example, it is estimated that 70 or the Japanese workforce doesn't work for the large name-brand  companies but small and midsize companies. If the small and midsize companies don't increase wages near what big companies pay then there is going to be a real miss-match in the Japanese economy related to Japanese consumers.

There are positives and negatives to the work hour schedule in Japan. Some women might want to work more hours while some might like the 20-29 hour schedule.

But yes, as far as taxes and insurance goes it might be a negatives for some or many.

Perhaps the entire wage, tax, and insurance system needs to be adjusted to better fit the working women who want to work more hours as needed these days with a husband and wife both working or needing to work.

Perhaps its time to adjust the system to the 2020's where more women want and need to work. The idea of stay at home mothers, even in Japan, is an outdated, as families, both husband and wife need to work to make ends meet. 

Even today, as the birth rate falls in Japan and more women and men decide to not marry and to just work and move up the ladder in their career, the system needs to change to allow career working the same advantages then men have.

Have a nice day and be safe!