Japan Inflation Slows: Updated Nov. 25, 2024.

 

Japan inflation slows in Oct. for 2nd month on energy subsidies

Article Source: https://mainichi.jp/english/articles/20241122/p2g/00m/0bu/004000c

Ideas:
Inflation might be slowing but its still a challenge for many Japanese households. And the 2 percent target set by the Bank of Japan is just a number, as Japanese households don't care what the number is its just that its high. 

The energy subsidies are needed and good, but of course its government spending and Japan has one of the highest government debt to GDP ratio in the advanced world.

The challenge is the Japanese government has spent a lot since the pandemic to help the Japanese economy but all of the spending might be considered government debt, which just increases the debt to GDP ratio.

One of the main challenges in the Japanese economy is that Japan is a resource-poor country which means it has to import which of what is needs, and if prices are high overseas, most likely they will be high in Japan too, and importers will pass-on their high import costs to the next in the supply chain.

And then add in the weak Japanese yen which also increases import prices too, so there is another layer of price increases that the domestic Japanese economy has to deal with.

If and when the Bank of Japan increases the key interest rate, it will not be that much, as the BOJ is concerned about how it will affect the overall Japanese economy.

The Bank of Japan might increase the key rate to 0.50 points which is still way below the US rate of 5.0 points which means the variance between the key rate and the Japanese rate still going to be significant which means the Japanese yen most likely will continue to be weak.

Most likely the Japanese economy might grow one quarter and show an annualized growth of 1.0 or even 2.0 percent, but is that going to be enough for the Bank of Japan to increase its key rate in the future.

Energy prices continue to increase as Japan has to import much of the energy it needs as it doesn't make or produce any energy in Japan, as its subject to global energy prices.

In years or decades past, Japanese companies including Japanese farmers, might not have passed-on their increased costs to the next in the supply chain including the final customer, but those days are long gone as most or many Japanese companies feel they have no choice now as their profits margins continue to shrink.

Previous articles have suggest there was enough rice on hand to overcome any shortages, but the problem was not a rice shortage but the hording of rice due to the Japanese governments advisory related to the possible earthquake in August.

And as usual anytime there becomes a shortage, companies will increase the price of a product, and in this case in supermarkets either by rice producers or the supermarkets themselves increased the price.

Once again, Japanese companies these days are increasing prices, or passing-on their energy and material costs to the next in the supply chain including the final customer, as their profits margins are getting thinner and thinner.

The service sector was hit hard by the pandemic and many either had to close or laid off a significant number of workers.

And then add in the so-called labor shortage in Japan now, as many services companies might be competing for the best talent possible and they need to pay wages maybe much more that what they are able to do, but need to do.

As a result they might be increasing their prices as a way to keep their profit margins at a normal level or as normal as possible.

Have a nice day!