Japan Core Inflation: Updated April 17, 2024.

 

Japan's core inflation accelerates again to 2.8% in Feb.

Article Source:  https://mainichi.jp/english/articles/20240322/p2g/00m/0bu/008000c

Ideas:

Most central banks, like the Bank of Japan, want to keep inflation between 2 and 4 percent, as they feel its manageable. If inflation is only 1 percent, it might mean there is not enough economic activity in an economy. If its about 4 percent, or more, it might mean inflation is too much and prices are too much for regular households.

Government subsidies can only do so much or only cover so much, as governments can't do everything to help society or the economy.

The reason fresh food is excluded in more core consumer price indexes fresh food can be very volatile, meaning prices can change a lot depending on supply and demand.

Inflation sometimes, like it can have a mind of its own, meaning once it start to increase or accelerate, its hard to slow it down.

Core-core CPI might be slowing but most likely, its still too high for many Japanese regular households, and definitely too high for fixed income households.

The Bank of Japan seems to be relying on Japanese companies to increased wages above the inflation level, but the challenge is getting all Japanese companies, large, midsize, and small companies to increases wages.

Last April, 2023, it was reported that mostly large companies increased wages but not many small and midsize companies were able to increase wages for their employees.

If all companies don't increase wages there is going to be a two-tiered system of wages in Japan of haves and have-nots over time.

Even though Japan has used an unorthodox strategy to try and end deflation, to be fair and honest, it doesn't seem have helped that much. But the same can be said about the US and its increased in the key interest rate, and maybe it didn't really lower inflation that much too.

Food prices can be attributed to the weak yen, less than good growing seasons, and overall general inflation and companies increasing prices.

Durable good prices might be attributed to energy and or material price increases as companies pass-on their costs to the next in the supply chain.

Cost-push inflation or companies passing-on their material or energy costs is now a common situation in Japan, for many years, companies were reluctant to pass-on their costs to the next in the supply chain, including the final retail customer for fear of losing a significant number of customers.

Energy prices are subject to global energy prices and the weak Japanese yen, as Japan is a resource-poor country and has to import much of what it needs.

It seems, maybe, Japan doesn't have any trade agreement with energy producing countries, which maybe can help in reducing its energy costs.

Services, in Japan, were hit hard by the pandemic with many layoffs and closing of businesses, and maybe many service companies have not been able to get back to a staff level like before the pandemic as maybe some or many former employees have moved on to other jobs in Japan.

At the same time, maybe many service companies have increased their fees to try and makeup for losses during the pandemic. And also at the same time, maybe service companies have had to pay higher wages just to get their staff levels back to normal.

Inflation might be slowing in some products in the Japanese economy, but again, inflation might still be too high for many in the Japanese economy.

Again, accommodation companies such as hotels and even restaurants might be increasing their prices as a way to makeup for lost profits during the pandemic period.

And also, as demand increases from an increase of foreign tourists, its only natural that some businesses will increase their price to take advantage of the increased demand.

And again, all Japanese companies, large, midsize, and small need to cooperate with wage increases so that all wage earners in the Japanese economy can benefit.

The Bank of Japan is going to keep its strategy of twerking the Japanese economy, as needed to make sure the economy can finally get out of its deflation state and inflation state, and its like a two-edged sword that the Bank of Japan has to deal with at the same time.

Have a nice day and be safe!