BOJ cuts view on 7 of 9 regional economies, notes strong wage growth
Just like a market economy, and different sectors, some better than others, the same with prefectures or states in Japan. Some might be doing better than others, which is normal in any market economy.
Of course private consumptions of consumer spending is normally not as strong in Japan as it is in the US, but the inflation situation has caused less spending than normal for this time of year.
And then add in weak auto production, which is a major economic driver in the Japanese economy. An economic driver is any economic activity that that increase economic growth significantly, and in this case auto production is a strong driver of economic growth.
The weak auto production situation might be related to the Toyota group and Daihatsu and their quality control challenges.
Hokkaido and Shikoku are relatively less strategic when it comes to Japanese companies and the Japanese economy, so there might not have been enough change up or down for them to be included up or down.
Of course the Hokuriku region of course will continue be downgraded due to the earthquake, and it might take some time, maybe a year or more for the region to get back to normal or near normal.
Nonmanufacturers or course are positive about what is happening in the Japanese economy, with hordes of foreign tourists coming to Japan and spending a lot of money, due to the weak Japanese yen, as foreign tourists have more purchasing power.
Manufacturing companies, large and small, are rarely that positive and their focus seems to be related to the global economy and maybe even what is happening in China, as China, at this time, is not where it should be economically.
Weather, warm or cold, of an extreme either way, seems to affect consumer spending, and in this case, a warmer winter reduced spending on winter clothes. Of course major retailers, like Uniqlo plan months if not years ahead, and they sometimes have no way of knowing exactly what the weather might be each summer or each spring.
They can of course make estimates, but based on normal weather expectations, which means maybe many clothing retailers had to have a lot of sales to reduce their winter clothing inventories.
The Toyota group, and Daihatsu which is a small manufacturer of the Toyota group, has had some quality control challenges and maybe even miss-representing it quality control data, and when it was discovered the Toyota group was forced to reduce manufacturing in some of its plants.
The Japanese economy might be recovering overall, but it seems like its constantly it a recovery stage and never seems to get past the recovery label into something better.
The key interest rate hike by the Bank of Japan, was probably not that significant, at this time, as they are not going to increase the rate too much because of possible side effect, which might hurt the Japanese economy.
All companies need to participate in wage increases including small and midsize companies for the Japanese economy to fully get to the 2 percent inflation level, away from inflation related to just companies passing on their costs to the next in the supply chain.
Services is the bright spot in the Japanese economy at this time, which is not usually the case as services were hit had during the pandemic and lost a lot of jobs due to layoffs and businesses closing.
The case might be made, that if Japan was not in a labor shortage situation, maybe some or many companies would not be offering wage increases to attract new or enough workers for their companies.
Core inflation might be in Japan for sometime and private consumption or consumer spending might be somewhat reduced for a while, unless of course many Japanese wage earners begin to spend some or all of the extra wage earnings, but that is not likely as most likely Japanese households will hold onto their extra income and use to pay for the basics such as utilities.
As the Hanami season is now in full bloom, and Golden week, the first week of May, which is week long holiday, their could be a surge in spending, but it remains to be seen if Japanese households will really spend a lot during the Golden Week period.
There is also the idea that once companies do increase wages, they need to pay for the wage hikes and most likely they will increase prices on their products.
And then there is the situation with small companies increasing wages, even though their profit margins might be compromised they might have no choice but to increase wages, to keep up with other companies or competitors in the same sector in terms of securing the best talent possible for their company..
Wage increases might not end the cycle of deflation, but its a good start, And then there is the idea of continued inflation that will replace deflation with price increases due to the wage increases.
So a combination of continued inflation and wage increases, which will increase prices on some products, might move the Japanese economy from the deflation stage to the inflation stage in the future.
Have a nice day and be safe!
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