Editorial: Japan's Lost Years: Updated May 2, 2024

 

Editorial: Gov't, businesses' neglect of people has cost Japan 30 years of stagnation

Article Source:  https://mainichi.jp/english/articles/20240430/p2a/00m/0op/020000c

 (It seems this article might have been deleted on the main website)?

Ideas:

It has been suggested that Japan grew too fast after WW11, especially in the 70's and 80's and maybe Japan became too arrogant about its growth rate, didn't really focus on building a foundation for the future, instead just focused on market share for growth.

An economy is very complicated and there are no easy answers to grow an economy and or restore an economy, which Japan is now tasked with doing. 

China might making the same mistakes as Japan has had and maybe take some time to restores its economy too.

Wages are only given once a year, in April, while inflation is a daily/weekly situation that keeps increasing.

Household spending or consumer spending in Japan is always a challenge and the Japanese, for the most part, have always been more savers than spenders compared to US consumers.

At one time, maybe in the 60's and 70's, and maybe the 80's too. Peter Drucker, the late management expert used to go to Japan every year and give seminars about business and management, and Japan companies revered him for his ideas.

What Drucker usually talked about, related to Japan, was Japan's emphasis on its human capital and how Japanese companies saw employees as key stakeholders, meaning workers were very important to Japanese companies, and at the time not just a commodity to be used and laid-off, when needed.

But those days seem a long time ago, and Japanese companies seemed to have become too westernized with their emphasis now on short-term results and thinking only of shareholders and not employees still as stakeholders.

Long-term plans or goals used to be the trademark of Japanese companies and they weren't too focused on short-term goals to keep stockholders happy, and again, those days seem a long time ago.

There might be a multitude of variables as to why Japan has not kept up in the world and maybe those mentioned are some keys to what has happened to Japan.

Perhaps, again, Japanese companies became too arrogant in the 1980's as there were many articles written that Japan would overtake the US and the number one economy in the world.

Well, it never happened and Japan has gone backwards for its heyday of the  1980's, and no company shows it more than Sony and or Japan's smartphone companies which have failed to keep up with Apple or Samsung.

Again, how many Japanese smartphones are among the market share leaders around the world? None, as Apple, Samsung, and maybe some Chinese companies are the market leaders these days, and Japanese smartphone companies only sell in Japan.

What was a key trademark for Japanese companies was developing in-company talent, but again those days were wasted as talent development became a secondary matter to keeping shareholders happy in a company.

Again, an economy is very complex and Japan, good or not so good, tried many things, that they thought was in the best interest of Japan. Most of course didn't work, but for the most part, didn't bring real harm to the economy, but just kept the economy in a semi-stagnation situation for a very long time.

Abenomics, at the time, seemed like the answer to get the economy out of stagnation situation, but maybe the Japanese economy was in such a hole, that not even Abenomics was going to get it going.

Its only natural that governments try to use fiscal stimulus packages to get the economy moving again, but they should be used sparingly and not continuously, as Japan has tried to do, and because they were used so much, they might have lost their affect on the Japanese economy.

Consumer sentiment seems to be in a deep dive or deep hole for a very long time as Japanese households and consumers lost hope in the Japanese economy ever being what it once was when it was more like free-wheeling free-spending economy of the 1980's.

That is the problem and challenges of monetary policy. Policy seems to help some in an economy and not help others in an economy and maybe even harm some.

For example, a weak yen helps exporters but hurts importers and the domestic economy, but again, its almost impossible to help each and ever sector in an economy with the same monetary policy.

Monetary policy decision makers have to make a choice and unfortunately, its the Japanese middle class that didn't really benefit from Abenomics, preferring to favor Japanese export companies such as Toyota and those affluent in Japanese society and business.

And yes, government spending became the norm at the time to try and lift the Japanese economy out if its stagnation situation.

Its seems the risk takers of the 60's, 70's, an 80's lost their drive after the Japan economy crashed around 1989/1990, and many of these risk takers either retired and or new management and CEO's were just content with the status quo.

It was at that time, that many Japanese companies started to re-structure and move more toward western style financial management and putting more emphasis on stockholder/shareholders and not so much on workers as important stakeholders in the company.

The entire Japanese economy and society had drifted into a just get by stagnation and the drive and risk-taking of the 60's, 70's, and 80's had been lost by all.

By now, maybe its going to be impossible to completely re-structure the entire Japanese economy, as maybe many young workers just don't have the needed drive and maybe many companies don't have the initiative to do the required restructuring.

And again, the focus seems to be only on shareholder value and not employee stakeholder empowerment, which can go a long way toward lifting up the middle class and also increasing consumer spending in the Japanese economy.

And maybe no-one really cares that Japan has fallen to 3rd, 4th, and 5th as an economy, an even more it terms of per-capita income.

Conclusion: This article might have been deleted from the main webpage as maybe it caused too much friction with the idea that both the Japanese government and Japanese companies were the main players that didn't do much to improve the economy, over 30 years.

But to be fair, Japanese government and the Bank of Japan policy makers tried to do what they thought was best for the Japanese economy at the time. 

Again, an economy is very complex and has many moving parts that can't always be fixed or managed at the same time, Policy makers have to makes decision, and they know there are going to be side-effect with whatever they try to do.

Have a nice day and be safe!

Japan Jobs Availability: Updated May 3, 2024.

 

Japan job availability down to 1.29 in FY 2023, 1st fall in 3 yrs

Article Source: https://mainichi.jp/english/articles/20240430/p2g/00m/0bu/019000c

Ideas:

Most likely, but not always, companies will use different reasons/excuses to not do something, and maybe the increase in material costs as a reason not to recruit as before, even, even though there is a so-called labor shortage in Japan.

Even though there might have been 128 jobs available for every 100 jobs, that doesn't mean the jobs were full-paying jobs or quality jobs that every workers needs or wants.

Japan, unfortunately, has been using more contract workers, part-time workers, as a way to reduce costs and or reduce benefits to meet shareholder requirements.

An economy is made up many different sectors, with each having different needs, and no sector is exactly the same is another sector. As such they might have different labor structure needs and hiring needs too.  

If Japanese workers can get the needed pay raises that can keep them in their current jobs, that is good, but at the same time, if workers need to or have to find a better job, the labor market in Japan should be flexible enough to allow for workers to change jobs easily too.

The challenge is small and midsize companies that might not be able to give good enough pay increases to either keep their current workers and or recruit new workers, as again, their is a so-called labor shortage in Japan.

Most likely, both educated and the not-so educated might not like manufacturing jobs these days, even though they might be high-paying jobs, and many young workers don't want to work in such difficult jobs,.

At the same time maybe the lifestyle and entertainment sectors haven't been able to match or meet the expectations of young workers with wages like in the high tech sectors or large company sectors, and as such maybe many young people don't want to work those kinds of jobs.

The education sector might be in a different situation, as inflation might be limiting the number of customers and as such demand is down so many education sector jobs, such as after-school academies can't pay the wages that workers want.

There needs to constant flow of workers in and out of jobs, in any economy, including Japan, as the more fluid an economy is, the more flexibility is more workers can easily change jobs, and not get stuck in a job they don't want or like.

It might be just a coincidence that men were down 30,000 in unemployment and women were up 30,000 in unemployment.

But a encouraging number is the number of women in Japan increased by 270,000 as women in Japan are an under-utilized resource that Japan is still not using correctly in its economy.

Of course maybe the inflation situation has forced more women to join the Japanese workforce and one member family members working is just good enough these days, and even in the US and other countries, just doesn't work anymore.

Economic or financial household challenges are probably the main reasons for more women entering or even re-entering the workforce, Also of course is the chance of the possibility of more or better pay as companies increases wages this April.

No economy is ever going to have 0 percent unemployment as there are always going to be some people who quit their jobs, some people in a transition phase between jobs, some people, unfortunately get laid off and so on.

But at the same time, there has to be flexibility and fluidity in an economy that allows for a much movement as possible between jobs for workers/people to pick and choose as needed.

Have a nice day and be safe!

Japan Industrial Output: Updated May 4, 2024.

 

Japan industrial output falls for 2nd year in row on weak chip demand

Article Source:  https://mainichi.jp/english/articles/20240430/p2g/00m/0bu/006000c

Ideas:

There are always going to be business cycle type changes and output doesn't move in a linear upward trend each quarter or each year. 

At the same time, an index of 102.8 is not bad considering the base year is 100 so 102.8 is still good and not a real contraction. Maybe its not exactly what industrial stockholders were looking and hoping for. 

Demand for semiconductor equipment might be going through a transition period, especially in China, as it seems the Chinese economy is going through some kind of change needed to move it from the boom of the 90's to the future boom beyond 2024.

The industrial sector might have many separate parts and if some of the parts not operating at full capacity it shows in the production index.

But at the same time, just because there are slowdowns in different economies doesn't mean all is not good as there might be positive signs in other economies.

Auto production has always been a strong economic driver for the Japanese economy, both in terms of exports and domestic sales too.

The chip shortage goes all the way back to 2020 and the beginning of the pandemic, and back then there was a BBC article by a German auto company CEO, that said the chip shortage could last more than two years.

Industrial shipments are related to global demand and if demand, but still at 102.0 its still relatively good.

Inventories are another story. For example if inventories start to buildup and or remain in warehouses for too long, it could be a strong indicator of decreasing demand in the Japanese economy and global economy.

If inventories trend toward continuous decreasing it might mean demand for some products are strong or still strong. Or it might mean the forecast for certain products was good and not over estimated.

Even the industrial output for March was at 101.1 which is still good, but maybe, as usual, not what investors are looking for.

Again, industrial shipments increased which means global demand for some products were still good even though it was only at 100.0, which is still not bad. 

The problem is, investors always seem to want perfect outputs or results and when results are only good but not perfect, they panic.

But inventories increased to 102.7 but does that represent the amount sitting in warehouses or does that represent shipments of inventories.

As seen there are 15 different industrial sectors, and they all don't move up or down at the same time, as nine increased in production and six saw decreases in product, which is very representative of what an economy does, as all sectors don't move up or down the same.

The language... "showed weakness while fluctuating indecisively" is just normal activity as all sectors, again, don't increase or decreased exactly the same, just like an economy, as all the sectors don't move up or down exactly the same.

April and May are the beginning of the new fiscal year in Japan, as as such maybe many businesses planned to increase production and output during those months.

Also Golden Week is in May, which is a week-long holiday period for Japanese society, so it will be interesting if production increases or decreases in May due to the week-long holiday, when many take vacation time.

Have a nice day and be safe!

Japan Company Retirements: Updated May 7, 2024.

 

Early, voluntary retirement offers accelerate among Japan companies as wage hikes mount

Article Source:  https://mainichi.jp/english/articles/20240427/p2a/00m/0na/016000c

But what an unfortunate situation that companies are asking for some to retire to increase wages!

Ideas:

Many years ago, labor or workers were not really considered a fixed cost and were considered a valuable stakeholders. But today, it seems Japanese companies have transitioned into western style companies with layoffs, early and voluntary retirements, which probably are not really voluntary.

Unfortunately, Japanese companies have been under pressure to increases wages, but they only have so much room in their profits margins, so maybe a combination of increased prices and so-called voluntary layoffs to keep the profit margins in the black.

And of course they have to keep the all important shareholder happy so they forget about their valued workers and focus on the bottom line, and like western companies just layoff their workers.

Again, many years ago the late Peter Drucker, the famous management consultant, always talked about how workers or labor were important stakeholders in a company and should not be considered as a fixed expense. 

At the time, many US companies didn't like his advice so he took his ideas to Japan and Japanese companies liked his ideas about employees being stakeholders and so they treated their employees as important stakeholders for many decades.

But these days, again, those days seem a long time ago and the norm in Japan is layoffs and early retirements and keeping the shareholder happy.

Its quite possible, that maybe some investment firms, which have become a part of some large Japanese companies are driving the early retirement focus, as maybe companies really don't want to do it but a group of shareholders related to the investment firms are forcing companies to layoff and or force early retirements.

For example, as I had contact with large engineering and construction company, the CEO said the worst part of his job is/was dealing with shareholders and investment companies.

It seems that investment companies only have one strategy to reduce costs and that is to layoff workers and or force early retirements.

Maybe the idea of "life-time employment" in Japan is now dead and or its been dead since the asset crash of 1989/1990, which Japanese companies for noted for, or at least the large companies.

Have a nice day and be safe!

Japan Cashless Tax Refunds: Updated September 6, 2024.

 

Japan eyes cashless tax refunds to stem illicit resale by tourists

Article Source: https://mainichi.jp/english/articles/20240424/p2g/00m/0bu/003000c

Ideas:

On the surface it sounds like a good idea as some foreign groups takes advantage of the tax refund system, and buy hug amounts of tax free good and then go out and sell them. They probably have buyers before the go to Japan, buy things and then sell them to their buyers abusing the tax free system.

A good way, if possible, is have the foreign travelers show the products that they bought at the airport and then they can get a refund, either by credit card or cash. Of course that might be too time consuming for some, but its worth a try to reduce the tax refund cheating taking place. I am hesitant to say which groups to it, but they do it. 

Of course there are always going to be schemers or those who try to get around the legal system, and its universal, not just in Japan.

Cash refunds are good, but at times it can be a challenge. For example, when I wen to Yokohama in 2023, I got a tax refund at a store, but it took a very long for the sales clerks to check each item and then get the refund. It almost was not worth it, and I didn't try to get any more refunds after that.

It would be interesting to see how many foreign tourists get a refund and how many don't due the time it takes at the store to get a refund.

I don't know if any way to speed up the process in the stores in Japan, as the clerks need to check to be sure the products being bought are on the tax free list but maybe if they tagged the products or included them in the data system, and clerks can see the product automatically is tax refund products, then they don't have to verify each product as they check them, which they did with the products I bought.

If every foreign traveler is checked for their duty free products that can be very time consuming. For example, if 300 Chinese are traveling back to China, and the customs officials have to check each and every Chinese traveler, that can be very time consuming, and cause a lot frustration on both sides.

But how are customs officials  supposed to know who is carrying duty free products, if they don't carry the duty free bags or boxes separately, and not in their luggage. Maybe that it the trick some foreign travelers use, intentionally or unintentionally.

Of course they can check their passports, because at the stores the clerks are supposed to scan the foreign travelers passports into the tax free system, but that too can be very time consuming, and can be very frustrating for officials and foreign travelers.

All that is good and needed, but again, unfortunately, there are those who find ways around the system, as there are cheaters everywhere and not just in Japan.

If Japan devised a system, where passports are scanned at the stores, and then put into a system, and then scanned again at the airport, and if they bought a certain amount, at its flagged as a lot, then their luggage should be checked to see if they have the products still int the duty free packages. That might be a good start to eliminating some of the tax free cheaters in Japan.

Have a nice day

Bank of Japan policy Meeting: Finally updated Jan. 4, 2025.

 

BOJ to check effects of rate hike amid weak yen at policy meeting

Article Source:  https://mainichi.jp/english/articles/20240425/p2g/00m/0bu/011000c

Ideas:

The Bank of Japan might have increased the key rate, for the first time in 17 years but don't expect the BOJ to increase the key rate consistently like the US and EU has been doing.

The weak Japanese yen is both a positive and a negative for the Japanese economy, as its an advantage for Japanese exporters, Japanese investors in foreign markets, and foreign tourists who go to Japan because the weak Japanese yen gives them more purchasing power.

But its also a negative for Japanese importers who have to pay more for because the weak yen increases import prices going to Japan, and Japan is resource-poor country, which means it has to import much of what it needs, and Japanese importers pass-on the increased costs to the next in the supply chain including the final customer.

If the Japanese authorities did intervene in trying to prop-up the weak yen they probably did it in secret as they don't want to be seen or accused of currency manipulation. 

Yes, the weak Japanese yen is a challenge for Japanese importers and Japanese households but the BOJ has to examine what is best for the economy. That doesn't mean they don't know about the negatives of a weak yen, but the BOJ is in difficult position about how and when try and prop-up the yen.

Again, the weak Japanese yen is like a two-edged sword with both positives and negatives, and whatever the Bank of Japan does its going to do cause some in Japan to be unhappy with the action.

Unfortunately, there is always conflict in the Middle East and this  year is no different, and there are always fluctuations in the global oil markets too.

Yes, import prices keep increasing because of the weak yen, and yes, finally Japanese companies are finally looking at the big picture and increasing wages for their workers, for the first time in a very long time.

But the problem is, up to 70 percent of Japanese workers don't work for large Japanese companies but work for small and midsize companies and they might not have received the same wage increase as the large company workers did.

The Bank of Japan might not guide monetary policy but most likely it does listen carefully to what the Japanese government wants and needs for the economy, and for sure it knows what is going on with Japanese households and what they want and need, along with listening to Japanese companies and their needs.

But again, the Bank of Japan is very concerned with being considered a currency manipulator, as they don't want to feel the ire of the US Federal Reserve related to it thinking the BOJ is a currency manipulator.

And related to inflation and the Bank of Japan trying to reduce inflation, it seems, at this point, the BOJ seems to be taking a hands-off approach and just letting inflation run is course naturally.

The Bank of Japan, like most central banks is usually slow to move on any situation and will probably communicate when and if they its going to increase the rate.

And at the same time, the BOJ doesn't want to upset the financial markets in Japan and globally as anything that the BOJ is going to do, it will decide very carefully.

The BOJ has suggested before that it will take action is inflation continues to go up, but up t this point has only increase the rate one time, and the rate increase was very small.

Regarding the variance between the US dollar and the Japanese yen, the key rate difference has definitely been a major factor in the weak Japanese yen, compared to the US dollar.

During the pandemic and a few years after the US Federal Reserve was increasing the key rate many times while the Bank of Japan kept suggesting the Japanese economy was just too weak the increase the rate in Japan, which increased the variance between the two currencies.

Don't expect the Bank of Japan to reduce how many Japanese bonds it will buy as the bonds basically increases the money supply in Japan which helps to keeps rates low for Japanese households and Japanese businesses.

Yes, it increases the Japanese debt level, as Japan has one of the highest if not the highest debt to GDP levels among advanced economies, but it seems at this time the Japanese government and the BOJ are not very concerned or they don't know what to do about it.

Have a nice day!

Japan Supermarket Sales: Update September 15, 2024.

 

Japan supermarket sales grow 3.7% in FY 2023, biggest rise in 32 yrs

Article Source:  https://mainichi.jp/english/articles/20240424/p2g/00m/0bu/012000c

Ideas:

Sales in supermarkets, like exports, seemed to increase due to inflation or the weak yen. Yes, sales are good for supermarkets, but without inflation, what would have been the real value of sales as Japanese supermarkets.

Sales as supermarkets, like many things, go through cycles as some months will be more than other months, and some months will be less.

Japanese consumers, for the most part, are more frugal than US shoppers, as they tend to save more and spend less.

The reason why they might have become less frugal is maybe they were/are anticipating a wage increase in April, so they increased spending some in March.

Again, sales usually are not the same every month as some months might be more and some months less, but maybe Japanese consumers/shoppers are tired of the situation with inflation and are trying to get back to some normalcy in shopping, like they were tired of the pandemic and just wanted to get back to some kind of normalcy in doing things.

Yes, the increase in sales might be temporary, as, again, every month can be different as no two months are exactly the same as shoppers are people and sometimes shop based on moods or emotions, not so much on needs.

It would be interesting to see the sales increases or decreases related to Japanese convenience stores and or sales at online sites in Japan.

So again, what would the real sales had been taking out the inflation increases and or the increases in prices related to inflation that companies pass-on to their customers.

The growing season for agricultural products might be related to the poor growing seasons, due to the extreme weather changes in Japan.

And the weather, good or not good for a specific season can affect consumers, and cause havoc for clothing companies and manufacturers, as the plan years in advance with forecasts and estimates about how many to make or sell in stores.

If the winter weather was too warm, for too long, retail stores might have had sales that were not so good, which means they couldn`t sell all of their products at a good price, and they had to discount many products just to get them out of the stores so they could bring in the spring and summer line of clothes.

Have a nice day!

Japan Small Firms And Wages: Updated Dec. 4, 2024.

 

Rate of small firms in Japan hiking wages rises to 63% in FY 2024

Article Source:  https://mainichi.jp/english/articles/20240422/p2g/00m/0bu/020000c

Ideas:
Its good that small and midsize firm are giving wage increases, but most likely they just don't have the profit margins as large Japanese companies do, and as a result the increases wage will be much smaller.

At the same time, as there is a so-called labor shortage in Japan, small and midsize companies are giving wage hikes as they need to make sure that they can get the best talent possible, and the wage increases might help.

It must be remembered, that 70 percent of the Japanese workforce don't work for large Japanese companies, but small and midsize companies only,

Japanese small and midsize companies are in a difficult situation as maybe they again, don't have the profit margins that large companies do, which means their labor costs and material costs are much more significant compared to large companies.

And then there is the idea of passing-on increased costs to the next in the supply chain, which most likely is the final retail customer, as maybe customers are elastic, meaning they react significantly to price increases.

And yes, there might be some or many small and midsize companies that just can't afford wage increases, which might mean their current employees might be looking to change jobs to a company that can give wage increases.

Sometimes it is assumed that most people work for large companies and the same in Japan, but the fact is around the world most people don't work for large companies, but the challenge is small and midsize companies need to pay the same as large companies but many of them don't.

Another part with small and midsize firms is many of them in Japan are suppliers or contractors for large Japanese companies, which puts them in a very difficult position.

If they are a supplier or contractor for a large Japanese company, most likely the large company might put pressure on the small company not to increase parts or service charges, and if they don't agree, they could lost their contracts.

And that means as material prices increases along with energy prices their profit margins shrink which means they can't increase wages like large companies can do.

If small companies can't increase wages that means their employees can't afford to pay their bills and or they have little or no disposable income left to use in the Japanese economy.

And then, again, there is the idea of labor shortages which means those employees, might want to change jobs to companies that can have wage increases, as its possible there are more jobs available to choose from.

As 70 percent of Japanese workers don't work for large companies, and as the 70 percent might not get the wage increase that large companies do, that then means a large group of workers in the Japanese economy can't spend much and consumer spending will not be enough to help with economic growth.

Most likely many companies were fearful of losing employees if they saw other companies increasing wages and they weren't.

They all know inflation is out there but they wait and see what the other companies are going to do about it. When a market leader or influential company such Sony or Toyota or Panasonic finally increase wages then other companies begin to do the same thing.

As, again, as there is a so-called labor shortage, many companies are afraid of losing their best workers and so they begin to improve benefits and other situations in a company including increasing wages.

Have a nice day!

More Bank Of Japan News: Update Dec. 3, 2024

 

Bank of Japan chief points to hiking interest rates if inflation keeps rising

Article Source:  https://mainichi.jp/english/articles/20240420/p2g/00m/0bu/004000c

Ideas:

Japan didn't interest rates for many yeas, as they felt the Japanese economy, during and after the pandemic was just too weak. The Bank of Japan didn't follow the usual strategy of other central banks, like the US bank of the EU bank, and increase the rate as inflation increased.

It remains to be seen just how much the BOJ will increase rates in the future as they have a long way to go to reach the level of the US and the EU, as way to stabilized the weak Japanese yen.

There both positives and negatives to increasing the key rate and the BOJ has to decide which are most important to the Japanese economy in the future.

The Bank of Japan knows that all inflation is the same, as some inflation is related to companies passing-on their costs to the next in the supply, which might be considered negative inflation.

And then there is positive inflation which is inflation due to increasing prices due to increased demand and increased consumer spending in the Japanese economy.

Most likely if inflation is below the 2 percent BOJ target its positive inflation that hasn't been achieved yet in the Japanese economy.

The short-term interest rate range of zero to 0.1 is way below the US rate, which might be a reason for the weak Japanese yen.

The main reason Japan has kept it short-term rate very low is too get businesses and Japanese households to borrow easy money and use it in the Japanese economy, but so far, at least with households, they haven't increased their spending.

However, the Bank of Japan, like most central banks are are very conservative group and they are not going to just increase the key rate if the data is not there to support a rate increase.

The Bank of Japan might be the biggest owner of Japanese government bonds and for the most part, there are not that many external owners of Japanese bonds.

The only positive, related to Japanese government debt to GDP ratio is that most of the debt is owned by the Bank of Japan and there are very few external owners, which was not the case with Greece in 2010.

The Bank of Japan usually moves very slow and reacts very slow as they don't want to upset the financial markets with any sudden moves.

Since there hasn't been any real concrete signs that the Bank of Japan is going to increase the key rate, most likely nothing much is going to happen in the Thursday meeting.

The BOJ might raise it inflation forecast, but that is not a sign of a change in the key rate, as again, they will move very slow and watch everything very carefully in the future.

In years past, as inflation increase the BOJ didn't increase the key rate, as at that time, again, they felt the Japanese economy was too weak and they also felt there were potentially too many side affects for the Japanese economy and increasing the key rate.

The weak Japanese yen has been a negative for the Japanese domestic economy for some time, but also even though the Japan is a resource-poor country, with the weak yen increasing import prices, there are some positives related to a weak yen too.

Japan has to import much of what is needs and with the weak yen, it increases import prices and importers of course pass-on their costs to the next in the supply chain.

The positives of the weak yen are that Japanese exporters see higher revenue for the products along with Japanese investors see more returns and of course the record number of foreign tourists have more purchasing power with the weak yen.

What Ueda, the Bank of Japan governor is saying here is when the BOJ increases the rate, they don't have enough data to see how the increased rate would affect the Japanese economy, as interest rates go up, borrowing costs go up and the BOJ just don't have enough data to see how the increased interest rate affects borrowing.

So the BOJ is basically in the dark after many years of not increasing the rate for a very long time, and no data to look at related to increasing the key rate.

Have a nice day!

Bank of Japan and Inflation: Updated September 16, 2024.

 

Bank of Japan considering inflation forecast for FY 2026 of around 2%

Article Source:  https://mainichi.jp/english/articles/20240419/p2g/00m/0bu/059000c

Ideas;

 Regular Japanese probably don't think much about what is going to happen in 2026 as they are only thinking about today and maybe tomorrow.

Estimates and forecasts are good and needed in some situations, but a forecast related to  two years is risky, as the situation can change a lot in two years.

No one can be sure if inflation will be 2 percent or 2.5 percent or even 1.5 percent precisely in two years.

The kind of inflation the Bank of Japan is looking for is consumer demand inflation, and companies increasing prices based on consumer demand, not the inflation related to an increase in energy and material cost increases.

Wage growth in Japan is long overdue, as it been suggested, many companies have not given wage increases for a very long time.

The US key rate and the Japanese key rate is not even close, and the reason maybe for the weak Japanese yen.

While a 2.8 percent increase in consumer prices might not seem like that much, but if you add up the 2.8 percent every month, in Japan, since the pandemic, it adds up every month.

Perhaps the Japanese government should have put some prices controls on some products such as rice, eggs, bread etc. to control inflation some.

Price controls can help but they should be used only in emergency situations like in the summer of  2024 , when there was a supposed rice shortage and rice prices sky-rocketed in Japan.

Underlying inflation might be consumer demand and consumer spending, which has never been that robust in Japan, as compared to the US.

As Japanese consumers begin to spend significantly, prices might begin to increase as companies see consumers buying their products or services, and will naturally increase prices because of demand.

But that is not going to happen until most or many people can see and feel significant wage increases, as unfortunately, up to 70 percent of Japanese workers don't work for the large name-brand companies in Japan.

The small and midsize companies didn't or don't pay the higher wage increases that the large Japanese company do.

During the pandemic and later, the US Federal Reserve, the US central bank increased its key rate many times, while the Bank of Japan didn't increase the rate until this past march, which has caused a large variance between the two key rates, which most likely is the reason for the weak Japanese yen.

The Bank of Japan is always talking about what its going to do with the weak Japanese yen, but, has not done much.

However, it remains to be seen or known that the BOJ is doing behind the scenes as they don't want to be seen or known as a currency manipulator on the global stage.

Have a nice day!

Japan Trade and Exports: Updated July 11, 2024.

 

Record exports trim Japan's FY 2023 trade deficit to 5.89 tril. yen

Article Source:  https://mainichi.jp/english/articles/20240417/p2g/00m/0bu/005000c

Ideas:

Even though there are 120 million Japanese in the domestic economy, and the 4th largest economy in the world, Japan seems to be mostly an export oriented economy.

Japan's trade deficit has been larger than usual due to the weak Japanese yen, which increases import prices and also because China has been having internal economic structural challenges which has affected trade to and from China.

The US economy and demand seems to be the one bright spot in the global economy at the present time, which means Japanese export companies seeing huge increases in demand from the US.

Japanese exports increase the Japanese current account but Japanese imports, decrease the Japanese current account, which is like a country's bank account. 

It must be remembered, are the numbers being listed are they volume numbers or export/import value numbers, as value numbers can inflate both import and exports, but so can volume numbers, as it really doesn't say which.

But anyway, the recent trend, which is good, shows Japan's export companies are continuing to do very well, and of course maybe demand from the US economy has a lot to do with that.

The Japanese car industry, which is made up of 8 or 9 car companies, and some being subsidiaries of the larger car companies, seems to be a major export driver for the Japanese economy.

An economic driver is any industry that significantly increases economic growth and the Japanese car industry does just that.

As Japan is resource-poor country, it has to import much of what it needs, as a such is subject to global price trends along with the Japanese yen, being weak, causes import prices to increase.

But it seems, that maybe import prices, at least for energy commodities are finally beginning to decrease.

The Japanese economy seems to be falling into the same trap as South Korea is in but as Japan is the much larger and older economy, at least since WW2, as the trap seems to be only focusing on a few exports as economic drivers and for Japan of course its cars, but for South Korea, its seems to be semiconductor chips.

As cars in Japan go, so goes the Japanese economy, meaning when its good its, very good, but if global trade and or the US demand drops off Japan could be in trouble.

Japan needs to expand its global presence beyond just Japanese cars, like it did in the 70's and 80's when Japanese products flooded global markets.

Not to sound negative about the article, but the US, recently, has not indicated its going to increase rate hikes and inflation in the US seems to be leveling off and the need for rate hikes seem to have passed. 

China, while not strong now, seems to be have reached bottom, which could be good as now it only can get better and economic conditions will begin to improve.

The situation is the middle east is always a challenge as global factors can easily affect business and global trade.

Japan needs to have some trade agreements with oil/energy producing countries as a way to offset increases and deceases in energy prices that affect Japan, as resource-poor country, which requires it to import most of the energy it needs.

The Bank of Japan, if its going to intervene in the currency market, has to be very careful and not look like its a currency manipulator, as the US is watching very carefully to see what Japan is going to do due about the weak Japanese yen.

The US dollar at 6.5 percent higher doesn't seem that much, but if it been increasing every month the past few years, it could be even more.

A weak Japanese yen is good for Japanese export companies but not so good for Japanese import companies, as it increases imports into Japan, which mean importers will pass-on their costs to the next in the supply chain, including the final customer.

Again, trade with the US, might be the one bright spot for the Japanese economy, as China, while a strong trade partner with Japan, has not been as strong as it was before the pandemic.

And again, if Japan only relies on the US for trade, it could be a challenge if demand for Japanese products decreases too much, like it has related to China.

Are the numbers being listed again, are they volume numbers or value numbers, as the weak Japanese yen, inflates both numbers.

It seems both imports and exports to and from China are decreasing for any number of reasons, and perhaps there are still some logistics challenges that have existed since the pandemic.

But one area that probably has not improved much is the ban on Japanese seafood to China as the Chinese government might still have a ban from seafood and the Fukushima region where the earthquake happened, which affected the nuclear site in the region.

But the Chinese economy seems to be going to a period of transition, and its probably not back to full strength just yet.

Japan needs to focus as much as it can on trade with the rest of Asia and not just China, and certainly not just the US, as the rest of Asia, including South Korea, is a large economic area that should not be ignored as the rest of Asia is large economic zone with a lot of potential customers.

The European Union is a large area, but of course has had challenges recently including the Ukraine situation. 

But overall, including Germany, the EU has been in a stagnant situation for a long time and it does look to improve anytime soon.

But again, Japan should not give up on the EU and continue to import and export as much as possible as there are a lot of potential customers in the EU.

Have a good day and be safe!