Japan Core Consumer Prices: Updated June 26, 2024.

 

Japan's core consumer prices up 2.5% on year in May

Article Source: https://mainichi.jp/english/articles/20240621/p2g/00m/0bu/020000c

Ideas:

Inflation continues to be a challenge for not only Japanese households but Japanese businesses too. Ever since the pandemic inflation has been a challenge for the Japanese economy, and it doesn't seem to be ending anytime soon.

And at the same time, the weak Japanese yen has caused the prices of imports to be even higher than normal, which puts more stress on households and Japanese businesses.f

Normally, central banks, whether good or not so good, will increase the key interest rate as a way to try and lower inflation, but the Bank of Japan has decided to just let inflation run its course and not really intervene that much.

The Bank of Japan's idea of 2 percent inflation target seems to be out of reach at this time, and it might be out of reach for the next year, until maybe the weak yen can be reduced, which might make the variance between the US key rate and the Japanese key rate much more equal, if at all possible.

The US central bank of US Federal Reserve says they only plan on one key rate decrease this year or this summer, which means the variance between the Bank of Japan and the US central bank is not going to be reduced anytime soon.

Energy prices are subject to the weak yen and global supplies and Japan is resource-poor country which means it has to import much of what it needs including energy.

There have been many programs on Japanese TV which has talked about food prices and how much so much can buy these days. Even friends in Japan say 5,000 yen used to buy a lot but these days doesn't buy much at all.

Wage growth might not have an affect on Japanese households until maybe after the summer season or Obon season, and then maybe Japanese households can see the affects start to help.

Service prices, due to increased demand and service companies trying to make up for losses during the pandemic have probably increased a lot.

For example, as I survey some of the hotels in Yokohama, that I usually stay at, the hotel prices have increased a lot during the past two years.

Again,  service type companies might be increasing prices not just because of increased demand, but because of the need to makeup for losses during the pandemic, where service type companies were hit the hardest and lost a lot of sales and profits.

Not all Japanese workers got the same wage increase as large company workers did. Some might have gotten much less and again there will be haves and have nots in the Japanese economy related to wage increases.

The BOJ and the 2 percent inflation target might not be reached soon if only large companies reach the 5 percent wage increase level, as some 70 percent of Japanese workers don't work for large name brand Japanese companies.

The Bank of Japan's target has never been close and as always seemed some distance away, as inflation continues to be a major challenge for the Bank of Japan and the Japanese economy.

Yes, Japan is a resource-poor country, which means it has to import much of everything that it needs, from raw materials to make things, basic food, and basic energy needs.

Japan, for the most part, needs more free trade agreements with many other countries related to many items, as a way to reduce import prices and tariff prices which will help Japanese businesses and Japanese households.

Inflation will continue to be a challenge for Japan, but to be fair, even the US is still having some challenges with inflation as it hasn't completely gone away in the US too, at this time.

Have a nice day and be safe!