BOJ and Inflation and I.R. Updated Aug. 2, 2025.

BOJ likely to raise inflation outlook for FY 2025, keep rate steady

Article source: https://mainichi.jp/english/articles/20250730/p2g/00m/0bu/035000c

Ideas:

The Bank of Japan is a very conservative central bank and its not going to do anything that they think might upset the financial markets at this time, especially when the Japan stock market it at an all time high.

Normally, a central bank will increase the interest rate if inflation continues but the BOJ seems a slightly different central bank that the US and EU's bank.

Of course the tariff situation is/could be a major reason why the BOJ didn't increase the key rate.

Even at 15 percent for the tariff rate, many Japanese companies might be significantly affected and again the BOJ must have taken that to account for not increasing the key rate.

The Bank of Japan, as it usually does, might think the Japanese economy is too weak for an interest rate hike at this time and they might be looking ahead as the economy could weaken even more because of the tariff situation.

Uncertainty is what companies don't want or like as they are unable to plan correctly for the next few quarters or the next year.

Japan car companies are global players as they need certainty and now as the global trading system has been completely disrupted they are unsure about the future and how to plan for it.

The 15 percent tariff might not be that much for large Japanese companies to absorb as they have larger profit margins but the same can't be said for Japanese small and mid-size companies that have much smaller profit margins and probably can't handle much more since they recently might have increased wages in April.

The major challenge is going to be for small and mid-size companies as they are very unlikely to be able to absorb the 15 percent tariff. And many of these small companies are car parts companies that export to the US and many other Japanese companies that are going to be it hard with the tariff situation.

Probably the only thing they might be able to do is pass-on the cost of the tariff to the new in the supply chain which then means the US importers that handle Japanese car parts and other products will then pass-on those costs to US customers and unfortunately demand for the products might decrease.

As mentioned in previous articles the increase in inflation in an economy could mean more money flowing through the economy which then means wages will increase as everyone is benefiting. But the Japanese economy seems to be in a different world as wage increases haven't kept up with the increases in inflation which is making the Japanese economy and very uneven economy at this time.

On top of that as inflation increases and begins settle in consumers usually begin to get used to it and get back to normalcy in the spending but that has not happened in Japan as consumer spending remains weak and again due to the low wages that are paid to Japanese workers compared to the global economy.

Ever since the pandemic Japan has been under a lot of inflation stress but for a period of time the BOJ felt the Japanese economy was just too weak to increase the key rate. But recently it has begun to address inflation situation but inflation really hasn't changed much in Japan as it seems the usually strategies to reduce inflation just aren't working in Japan or at least right now.

There just might be too many unknown variables that are affecting the Japanese economy including what is called hidden inflation which is very hard to root out.

The Bank of Japan might be looking ahead not just months but years ahead related to the tariff situation and they might think the Japanese economy is going to be too weak to handle a key rate increase, so they are preparing now for what might happen six months to a year from now.

In this case the Japanese government too, needs to step with some doable concrete strategies to help small businesses that make up the bulk of the Japanese economy and find ways to help them with the tariff situation.

Have a nice day!

Japan 2024 Rice Supply: Updated Aug. 19, 2025.

Japan's 2024 rice demand tops estimate, outstrips supply again

Article source:  https://mainichi.jp/english/articles/20250730/p2g/00m/0bu/046000c

Ideas

You would think, as important as rice is for Japanese consumers, that whomever in the Japanese government would be able to to estimate what demand will be each year, each quarter and so on.

There is something significantly amiss to what is going on with rice production in Japan and or Japan is not taking advantage of using foreign rice to supplement its rice supply.

Again, perhaps its time to open the flood gates in a let all the foreign rice that is needed enter Japan as unfortunately the domestic rice market is highly protected and even though Japanese consumers might not like all foreign rice as the price is high for domestic rice, some Japanese consumers will begin to buy the foreign rice as needed.

We live in a global world with products available from many different countries. There is no longer the need to protect some domestic sectors as cooperation and trade among countries is a win situation for everyone.

Supporting rice production in Japan is good and needed but at the same time, open the flood gates and let more foreign rice into Japan. Japan is an ageing society and the age of Japanese farmers is even worse, as more and more young people are heading to Osaka and Tokyo and other metro areas.

It's time to completely overhaul the rice producing sector in Japan and bring Japan into the 21st century. Most farms in the US are now corporate farms and not farms owned by individuals or families. While it might take a while corporate farming might be what is really needed in Japan, eventually, to overhaul the entire agricultural sector.

Unfortunately the weather has a large par to play in rice production, but again, with more scientific farming and even smart farming Japan could eventually turn its rice situation around but nothing is going to change if Japan doesn't move into the 21st century with the implementation of smart farms.

The Japanese government has got to setup plans to help farmers become 21st century smart farmers and get away from 19th and 20th century style of rice production.

It's quite possible but maybe not probable that certain middlemen groups have been controlling the rice market in Japan to keep the price high for their benefit. It will be hard to prove it or see it as some businessmen have subtle ways to influence the market and the price of products.

There might have never been any criminal motive to keep prices high other than to ensure that profits for some or certain groups remained high enough during the rice shortage period.

And again, the hot summer weather, at record levels had a lot to do with shortage and no doubt pest outbreaks also may have increased the shortage situation.

Yes, an increase in inbound for foreign tourism might have contributed some but not all of the rice shortage in Japan as foreign tourists didn't eat all of the rice supply in Japan.

And yes, in late July or early August of 2024 there was the idea of a potential major earthquake in the news in Japan which caused a run on rice and many consumers in Japan horded rice like some people horded certain products during the pandemic.

As a result of the rice hording, the rice supply resulted in a significant shortage that is still on on going in the summer of 2025.

So in essence, part of the rice shortage in Japan is the making of Japanese consumers over-buying rice supplies due to their fear of believing everything they hear in the news.

Have a nice day!

Japan and Tariffs: Ideas Later: Updated Aug. 11, 2025

Japan warns of US tariffs after trade deal reached: monthly report

Article source: https://mainichi.jp/english/articles/20250729/p2g/00m/0na/041000c

Ideas

The Japanese economy doesn't grow very much and now with the tariff situation finished its going to grow even less, unless Japan can find some new economic drivers.

Even though Japan got a trade deal better than expected it's still going to have an effect on the Japanese economy but not as bad as expected.

The Japanese government is always saying the domestic economy is recovering moderately a as a way to not upset the financial markets.

Consumer might be picking up but Japanese consumers will never spend like US consumers do and maybe cultural differences make up a big part of it.

And it quite possible due to a labor shortage in Japan there might be more hiring now and companies are possibly increasing wages to keep workers and get new workers.

And its very good that the tariff deal removed the uncertainty in the marketplace as now companies have a better idea of what is going to happen and they can begin to plan accordingly.

Yes, even large Japanese companies, such a car markers have to worry about their profit margins and profitability as they are always concerned about their stockholders and what they think.

Back in the day, when Japanese car makers first entered the US market they relied on cheap cars just like other Japanese companies and they didn't worry about profits but only increasing their market share in the US. Those days are long gone of course.

Exports are never a complete linear upward thing but sometimes there are going to be ups and downs due to many variables relate to international trade.

Exports are an economic driver for the Japanese economy which is good but Japan has not been able to create any new economic drivers to help the Japanese economy grow.

Some might say foreign tourists coming to Japan and spending large amounts of money might be an economic driver but so far it hasn't helped that much.

It has to be remembered that only 30 percent of Japanese workers work for large Japanese companies and 70 percent of Japanese workers work for small and mid-size companies.

Wage increases for small and mid-size company workers were not the same as large company workers which could be a major challenge for the Japanese economy.

Yes, the tariff situation could have a major impact on the future growth of the Japanese economy, which has enough challenges without the tariff situation.

Again, the Japanese economy before the tariff situation was not in a good place and now its going to be in a even more challenging place.

If sales or profits are not what companies expect in the future, they might not hire as many workers and also at the same time might put off capital spending which is a big part of Japan's GDP.

And there is the constant challenge of private consumption or consumer spending which has never been that good in Japan except for maybe in the 70's and 80's when the Japanese economy was in its boom years.

The Japanese government and the Bank of Japan has to come up with some very creative ways to try and reduce the affects of the tariffs on the Japanese economy,

So to be fair the BOJ and the Japanese government haven't been able to steer its way out of the current stagnant state of the Japanese economy yet so there is not a lot of confidence that its up to the task related to the tariff situation.

Have a nice day!

More Japan/US Trade Information: Updated July 31, 2025.

Trade deal with US still weighs on Japan's inflation-hit economy

Article source: https://mainichi.jp/english/articles/20250724/p2g/00m/0bu/029000c

Ideas:

The Japanese economy has been on life-support for the past three decades and seems to think exports can help it while in reality its a very sick economy. Yes, its a staple economy that's been sick for over over three decades.

While I don't support tariffs and what the US admin. is doing this might be a wake-up call for the Japanese economy and the Japanese administration to finally do what it should have done back in the 90's which is let markets decide what is good and not so good which Japan has consistently denied doing. 

For example allowing low-performing banks and companies to continue to exist instead of letting the market sort out which should remain and which should go.

And yes, inflation is a major challenge for the Japanese economy, and again, the Bank of Japan might be the reason for the inflation situation as it didn't follow suit with what the US and the EU in increasing interest rates which tried to reduce inflation.

Unfortunately, the tariff situation always seems to hit the small and mid-size companies the worst while the large companies, which have more resources, might be able absorb all or some of the tariffs while small companies have profit margins which are too small to absorb anything.

But to be fair, this might not be the time for the Japanese government to help small companies but that is probably what they will need to do in this situation, as they might have a major crisis on their hands if a lot of the small companies exit the market.

I'm trying very hard to stay on topic here and not get into a complaining session about tariffs and the global economy but its hard to do.

But again, there might be a silver-lining in all of this for the Japanese economy and it might finally be the wake-up call that they need to change everything that hasn't worked the past three decades and finally allow for innovation in the market place and find a way to get rid of the zombie companies in Japan that is a significant road-block to growing the Japanese economy again.

Yes the situation has caused a lot of uncertainty in the global economy and the Japanese economy in that they didn't know what to do or how to plan for the future. Now that the tariff deal has been set companies can now plan or at least try to protect themselves from what is to come.

And again, the 15 percent tariff situation might not be good for any Japanese company but at least the large Japanese companies might have the resources to at least absorb all or part of the tariffs better than the small and mid-size companies which probably have very thin profit margins which they can barely absorb because of  the recent wage increases they gave to their employees, and again, might not have room for any more cost increases.

Because of the tariff situation, is possible the Japanese economy is headed back into another recession. It's quite possible that the tariffs could significantly reduce exports which has become a major growth engine in Japan and it is one of only a few left in the Japanese economy at this time, a as the rest of the Japanese economy just doesn't have the inertia to help grow the economy.

And yes, there is always the possibility that the US economy too could be headed for a slow-down but its highly unlikely there will be a full-blown recession but never say never now with the tariff situation as US consumers could decide to stop spending if they see product prices beginning to increase too much.

Not to get too much into it here but it seems the US admin. doesn't know or care about absolute advantage or comparative advantage related to international economics or international trade.

The global economy has just become too inter-connected and global supply chains have become to inter-connected too for any one country to do everything or make everything as globally many countries or companies, globally can do things much better that the US.

Yes, its hard to say exactly what the Japanese economy is going to do now with the 15 percent tariff situation, but most likely its not going to grow that much and might even be stuck between 0.5 and 1.00 percent growth for the time being.

Over the past three decades its seems to Japanese economy has fluctuated from being in a recession to being out of a recession. But the main variable that seems to always be a constant is decreased consumer spending in the Japanese economy and recently due to inflation.

In recent years or even decades it seems exports were the main economic driver in the Japanese economy as no other real sector or industry as been able to drive the economy.

Some might say, because of the huge number of foreign tourists entering Japan and the weak Japanese yen, which allows foreign tourists to have more purchasing power that the next economic driver is foreign tourism. But that it a big if as it could easily change and then where will the Japanese economy be.

As mentioned before, in many economies, as prices increase, as money begins to flow consistently through and economy, then wages begin to increase too almost unilaterally, but that is not the case with Japan as the Japanese economy seems to be in a world of its own reality and doesn't follow normal economic principles, as wages have not kept pace with inflation.

And then there is the concern for higher interest rates in the financial markets. No one wants to see high interest rates as companies will postpone getting loans, consumers will stop using their credit cards, even maybe taking out loans, and small businesses that rely on loans sometimes to get from quarter to quarter will decrease the loan buying which means to financial markets will begin slow down or begin to become stagnan.

Yes, with the 15 percent tariff situation a decreased domestic product of 0.55 percentage points is not good but its not as bad too as it could have been much worse. Of course the Japanese admin. would have preferred no tariffs but only at 15 percent might be considered a win for Japan.

The question is it going to be business as usual or is the Bank of Japan and the Japanese administration finally going to find ways fully re-vitalize the Japanese economy after almost three decades of stagnation.

One might say, and not just Japan, but all the countries engaged in the tariff situation, that the investment plans required by the US admin. was/is a tactic or even a strategy to accept the lower tariff or the tariff rate would have been much higher like at 25 percent or more.

There is no guarantee that the investment plans are going to really be beneficial to the US and there might be a number of variables involved in the process.

But what is possible is the investment plans might be extra debt for each country involved in the process.

Yes, all tariff deals, ideally, should benefit both countries but the current admin. or at least the head of the admin. doesn't think that way as he only thinks what is good for him only.

Again, maybe Japan got the best deal possible and was very lucky to get out of it with only the 15 percent tariff situation.

Yes, if done properly the investment situation and help both economies and not just the US economy but the Japanese economy too if Japanese companies are involved in the process in the US.

It was a good idea to identify the key negotiator in the US and work on him to convince how important Japanese products are to the US economy and how important Japanese investments are too the US economy too.

Potentially the 27.5 percent tariff on foreign made cars could have been a major challenges for many Japanese car makers and especially, as articles have suggested Nissan has been hit hard already with the tariff situation.

So maybe Japan's superior negotiating skills finally won out and and Japan was able to get a lower tariff with plans for investments into the US.

Yes, even at 15 percent the tariff situation will have a large impact on the Japanese economy and now its time for companies to plan ahead and find ways to protect their profits margins and maybe even develop a completely new strategy to deal with the tariff situation as it shouldn't just be business as usual in Japan.

Large companies most likely will be able to absorb most of the 15 percent without having to pass-on the increased prices to US consumers, meaning hopefully demand for Japanese cars will continue to be robust and strong.

But the situation for the small and mid-size companies that might specialize in the car part sectors are going to struggle with reduced profit margins from the tariff situation and the won't be able to absorb all of the tariffs and will definitely need the Japanese government to help with special programs or subsidies or something as many of the small companies will face significant challenges in the future.

Have a nice day!

Japan/US Trade Deal: Updated Sept. 25, 2025.

Japan, US reach deal on reduced 15% auto, 'reciprocal' tariffs

Article source: https://mainichi.jp/english/articles/20250723/p2g/00m/0in/005000c

Ideas

The Japanese trade delegation have to be congratulated for their effort to reduce the tariff to 15 percent after all of the Trump rhetoric about higher tariffs.

The 15 percent tariff is much better than the 25 percent tariff that was the intention of the US admin. But the problem Japan had to maybe offer 500 billion in investments in the US to get the tariff rate from 25 to 15 percent.

Yes, it was very good that Japan a major importer of Japanese goods to the US was able to achieve it did and actually might have had to best outcome of all countries in the tariff negotiations.

The rice situation might not be considered a negative for Japan is Japan has an-ongoing rice shortage situation so the idea of importing foreign rice might have always been in the works.

The challenge is of course getting Japanese consumers to like foreign rice when many Japanese prefer Japanese rice only. But if Japanese companies use the foreign rice to make other rice products then most likely it won't be a major problem.

The Japanese agriculture sector is one of the most protected sectors in the world and there was probably no way there was going to be any change in that sector in the tariff negotiations.

You have to take it with a grain of salt that the US will receive 90 percent of the 550 billion in investments by Japan into the US in the future.

And we need to take it with a grain of salt the hundreds of thousands of jobs will be created in the US due to investments by Japan into the US.

What Trump doesn't understand or doesn't want to know is trade is not a competition between countries but more of a cooperation among countries to import and export products for the good of both countries and both countries are better off with trade.

There is a very simple reason why Japan doesn't import US cars into Japan in that US cars just don't sell in Japan. For the most part, first Japan has eight car companies to choose from and the second part is most US cars are just too big for Japanese roads and streets as many Japanese cars are much smaller that US made cars.

European cars are much better for the Japanese streets and roads and there is a significant number of them in Japan but again they are still a small percentage compared to the number of Japanese cars in Japan.

Citing national security concerns might just be a reason to increase tariffs as they might be trying to protect US jobs.

But the problem is US consumers have a lot of choices now than just the 3 US car manufactures and US consumers are not going back as now they want and always want more choices than just US cars.

The problem with importing Japanese cars made in the US is cars made in the US are for the US market and engineered to US road and safety specification which might fit Japanese market and government specifications.

So that means Japanese car makers in the US would have to re-fit their assembly lines which could be very expensive for them.

And then there is the idea, which is not mentioned here that much is Japanese consumers just don't want US cars as for the most part, they are too big for Japanese style roads and the quality is perceive to be less than Japanese cars.

Japanese negotiators seemed mostly concerned with the Japanese car industry which is a major economic driver of the Japanese economy and and loss of sales and revenue would significantly affect the Japanese economy.

All other areas while important probably took a back seat to the real negotiations related to the car industry.

Again, not to say the other sectors or exports to the US are not important but Japan had to prioritize what was/is the most important sectors for the good of the Japanese economy.

Most likely, the tariff negotiations were just a starting point for other trade negotiations which was/is the real intention and not the tariffs.

For example if the US hadn't come up with tariff rate in the first place Japan and other countries for example might not thought of other strategies or angles to help them such a as the liquefied natural gas deal.

Again the tariff situation all along might not have been the real intention as they US wanted foreign investments such as the  550 billion investments related from Japanese companies.

The US probably knows it is now going to get all of the US manufacturing companies to come back to the US as the expenses might just be too much. So the other option was/is to get foreign companies to invest in the US and of course provide more jobs in the US economy.

Yes, it was/is a very good strategy by Japan to focus on investments as Japan might have known tariffs were not the real reason for countries exporting to the US but the intention all along was/is foreign investments in the US.

The signing of the agreement on investments might take some time to finalize as most likely both sides might want or want to change some parts of the agreement.

All countries today are interconnected and what happens in one country can have an affect on another country as supply lines are just too blurred these days.

Back in the day, it seemed countries were aware that what happen in one country can affect other countries as there was always a sense of fair play and trade was not a zero sum game but beneficial to and for everyone. 

But it seems, at least for the current US admin, they only think what's good for them and not what's good for everyone in the long run.

The agriculture sector has been and most likely will always be protected in Japan as agriculture is the heart of most economies around the world.

And yes, the auto sector is the backbone of the Japanese economy and will always take priority in any negotiations with foreign countries. 

The problem with Japan is that it really doesn't have any other sectors that can improve economic growth like the auto sector can.

Its a whole new world out there and international trade is never going to be the same after everything is done and finished if ever will be.

But then again, things could drastically change in four years as maybe an new US administration might come in and change everything again.

The US has always had a trade imbalance due to the nature of the US economy as a major consumer driven economy which means all countries want to sell their products in the US.

The US economy always has a trade deficit and always will as imports are more important than exports in the US.

Its a very common fact that US cars just don't sell in Japan and will never sell in Japan due to Japanese consume preference.US cars, for the most part, are not made for the Japanese roads and streets which are just too narrow and would not fit in Japanese roads.

And related to US agricultural products, again, the Japanese agricultural market is one of those protected markets in the world and it most likely will always be that way.

Again, its so simple to understand as the US economy has a trade deficit due to the fact that most countries want to sell their products in the US which is a major, if not the largest, consumer driven economy in the world.

The US is trying to have it its way only without thinking of what's best for the global economy or the long term.

The thing is, each country has a choice and the global economy is becoming a consumer driven economy with the global middle class getting bigger everyday which means consumers in other countries want and need new products, which eventually mean some companies in some countries might decide the US is not just worth it was there are other market globally that we can sell our products in now.

But it might take some time but that it could happen eventually as if the US is not interested in the global economy and what's good for everyone and other countries and other companies might just say its no longer worth it to sell in the US.

Have a nice day!

Japan's Core Consumer Prices: Updated July 24, 2025

Japan's core consumer prices in June rise 3.3% on year

Article source: chttps://mainichi.jp/english/articles/20250718/p2g/00m/0bu/018000

Ideas

Japan is a resource-poor country which means it has to import much of what it needs which also means its subject global price fluctuations related to shipping costs, raw material costs, and of course food price increases.

And then there is the problem of Japanese wholesalers or middle-men who add onto the import price to get their share needed to make a profit, which means the final Japanese customer has to pay a lot.

It's highly unlikely, in the near future that inflation in Japan will decrease below the 2 percent level any time soon unfortunately.

The pace of increase might be slowing some, but its still too much for the average Japanese household which means they have less and less disposable income each month and can't spend much in the Japanese economy.

The higher costs for mobile phones might be attributed to the I phone being very expensive globally including Japan and the entrance of South Korea's Samsung smartphones and the rise of Chinese smartphones too.

The Japanese rice situation is a disaster at this point as it's been on-going since the summer of 2024 with no real end in site yet.

Rice is a major staple in Japan and in Asia and should never be as expensive as it is. Food staples such as rice, bread, milk, some vegetables, and maybe some kinds of meat should never be so expensive that the lowest income groups should be able to buy these products easily instead of having to fore-go them because of price increases.

The rice situation or crisis in Japan is a national tragedy and never should have happened. This could be a situation where there might be the workings of a cartel type situation that is controlling the price of rice in markets as a way to benefit certain groups in Japan.

Rice prices might have peaked but prices are far from being back to normal and there are too many middlemen in Japan and the rice market is a very complicated web which makes pricing extremely difficult to back to some kind of normalcy.

Yes, prices continue to remain high which again means less disposable income for Japanese families which of course means less spending overall in the Japanese economy which of course reduces the chances for economic growth in the Japanese economy.

Energy prices are subject to global fluctuations as again Japan is a resource-poor country and has to import much of the energy it needs and then of course there is importers or middlemen group who need their share of the profits which increases the price of the energy being imported into Japan.

Japanese government subsidies help but the Japanese economy can't live on subsidies alone as some groups have to pay for the energy subsidies somewhere along the way.

The Bank of Japan is very conservative like other central banks but will look at the data very carefully and as usual will not make an rash decisions on what do to as they don't want to upset the financial markets with anything too risky.

Service companies were hit very hard during the pandemic and many had to lay-off workers and now they are experiencing a shortage in the labor market and they have to increase wages in order to keep or attract workers to work for them, like many companies are experiencing now in Japan.

Service companies are very quick to pass-on their costs as service companies have very thin profit margins and can't afford to absorb any costs such as energy costs, material costs, wage increases and so on.

Have a nice day!

Japan Trade Surplus: Updated July 23, 2025

Japan's trade surplus shrinks 31% in June as exports to US plunge

Article source:  https://mainichi.jp/english/articles/20250717/p2g/00m/0bu/018000c

Ideas

Exports to the US might have decreased due to an increase in car prices, an decrease in demand for cars and any number of variables related to the tariff situation in the US.

Whether positive or negative depending on what side of the fence you are sitting on, Japan's streak of trade surpluses might be ending, which could be a negative for the Japanese economy in the future.

As the trade deal between Japan and the US gets finalized maybe it will bring some certainty to the markets and to Japanese and US companies as when it does get finalized they can now plan for the future.

Most likely as the 25 percent tariff has taken effect Japanese car sales are down in the US along with demand for Japanese cars as US consumers might be evaluating their new car buying options more closely now.

Just because there are tariffs on most foreign imported cars now doesn't mean US cars are going to be cheaper as most US made cars, like all cars globally these days, have many car parts that are not made in the US and might have tariffs of the car parts too.

And then there is the steel situation or aluminum situation which cars might be made of and maybe some might be foreign steel and or foreign aluminum which has a tariff on them too, which will also increase the price of US cars.

Japan is a resource-poor country which means it has to import much of what it needs and it prone to changes in global markets which can impact the prices Japan has to pay for imports.

You would think Japan might have some kind of technological edge in manufacturing mobile phones but it seems Japan gave up that position many years ago, and the I phone is the most popular phone in the Japanese market, with Samsung increasing market share every year and now the Chinese with their superior technological advantage are moving quickly in Japan, while Japanese mobile phone companies seem to losing market share every year.

Unfortunately its only natural that the trade surplus with the US would begin to decrease as demand for Japanese cars are most likely decreasing every month now.

US imports to Japan are not affected by the tariff situation as Japan has not place a tariff on US imports and again, Japan is resource-poor country and putting a tariff, which is like a tax on US products will get passed on to Japanese consumers and make the current inflation situation even worse than it already is.

It has been suggested that Toyota and other Japanese companies are shipping less expensive Japanese made cars to the US and maybe even increasing the volume being shipped hoping that the volume increase will overshadow the loss from more expensive Japanese made cars.

Japanese car manufacturers might be absorbing the cost of the tariffs now, but how long can they absorb the costs before it starts to affect their profits margins and can it be sustainable for Japanese companies to do it in the long run.

Eventually Japanese manufacturers might have to tell their US sellers we can't continue to absorb the costs and you will need to begin to absorb some of the cost which might increase the price of a Japanese car in the US

Yes, most likely the trend is likely to fade as Japanese car makers will begin to realize they can't keep absorbing the cost of the tariff and eventually need to pass-on the tariff cost to the next in the supply chain, which of course could be the final customer in the US.

Japanese companies have always focused on price competitiveness as their main competitors are South Korean cars, maybe some Chinese cars now, and of course EU made cars.

Almost all car manufacturers use foreign car parts and its now a global situation and many of them come from Japan or even South Korea these days.

Exports of car parts from Japan might have decreased so the car repair companies or companies that make cars in the US have to get their car parts from somewhere so someone might be benefiting from the US tariff situation.

China is in a challenging situation at this time and its economy, while still robust, is not the economy it was ten years ago.

Trade surpluses increase and decrease every year and are never exactly linear or always increasing as there are many variables which can impact trade with other countries.

However, trade with the EU has been another challenging situation like China as the EU just doesn't seem to be the way it was before. The Ukraine war could be part of the problem but economies like Germany too are having their own trade issues at this time.

If Japan wants to offset the loss of revenue with trade from the US it will need to improve its trade situation with China and especially the EU or even improve its trade with the rest of Asia including South Korea, but even South Korea at this time is having challenges with the US tariff situation.

Have a nice day!

BOJ Economic Assessment: Updated July 18, 2025.

BOJ maintains economic assessment of all 9 areas despite US tariffs

Article source:  https://mainichi.jp/english/articles/20250710/p2g/00m/0bu/044000c

Ideas

The Bank of Japan, like most central banks, are very conservative and don't want to make any bold or outlandish statements that might upset the financial markets.

Japan's economy is very complex and has many different areas and sectors and they are not all the same and might grow much differently than the other.

Like most central banks, they like to use the phrase" recovering moderately" as again, not to upset the financial markets and make it look like all is OK.

The challenge, for the most part, is not the idea of a tariff, which in itself might not be that disastrous, but the challenge of planning as companies just don't know what is happening and don't know how to plan for whatever is coming down the road.

If companies knew that there is going to be a 5 or 30 percent tariff, or something like that, then they could plan and do what is needed to maximize sales and profits.

Companies hate uncertainty and now there is a lot of uncertainty on how to move forward in the next quarter or even the next year.

The tariff situation is not just a US vs another country situation but it affect everything globally as logistics networks are being significantly affected everywhere in the world.

A car, for example or even a smartphone might have parts from all over the world and not just from Japan or maybe even Brazil, maybe Indonesia and of course maybe even China.

And of course companies in the US might be increasing prices now to protect themselves from future tariffs and they might or might not actually be seeing any tariffs at this time.

Japanese companies seems to be a little behind in the digitization of their companies and sometimes they tend to move very slow, but when they do move they do move very fast.

The labor shortage situation in Japan has been a long time coming and the Japanese government knew about it but either didn't know what to do about it or couldn't do anything about it.

For example one idea that keeps coming up is improving immigration of foreign labor which might help the labor situation significantly but the powers to be are somewhat reluctant to open the flood gates to large scale immigration as there might be some political pressure not to do it.

And then there is the idea of productivity in Japan, which some economic organizations have suggested Japan has some of the lowest productivity metrics among OECD advanced countries.

Japan, for the most part, has been a people first society and economy and has been very reluctant to do anything that might disrupt the flow of society or company culture.

But as the world changes, Japan continues to fall farther behind, like it's stuck back in the 80's or 90's and hasn't been able to move forward into the 21st century.

Don't expect much from the July 30 meeting as again, the Bank of Japan, like other central banks don't make bold or outrageous statements so expect the BOJ to stick to the normal script of "recovering moderately" and or not much has changed in the tariff situation just yet.

At the same time, for better or worse, the tariff situation might force some Japanese companies to makes some bold changes in how they do things there might be even more movement into digitalization and maybe even some improvement in the foreign labor situation to help the Japanese labor shortage situation.

Have a nice day!

Japan Real Wages: Updated July 11, 2025.

Japan's real wages in May fall 2.9%, sharpest drop in nearly 2 years

Article source:  https://mainichi.jp/english/articles/20250707/p2g/00m/0bu/010000c

Ideas

Wages in Japan have been continually falling among advanced nations when in the 1980's Japan had some of the highest wages among economies.

While others economies have used the central bank as a way to try and reduce inflation, the Bank of Japan has been very hesitant, until very recently to increase interest rates as a way to try and reduce inflation.

The Bank of Japan and the Japanese government seem to be hoping that Japanese companies will increase wages enough to overcome the inflation challenge in the Japanese economy.

Real wages are a strong indicator of disposable income and purchasing power but both variables have not been good enough for Japanese households to get back to any kind of significant spending in the Japanese economy.

Consumers have got to be good about their wages or they are going to shrink back and wait until they feel better about spending and only spend on the needed items.

Japanese workers, especially large company workers get a bonus twice a year and if it good enough it can maybe spur some spending in the economy.

Nominal wages don't really mean much as real wages are the true indicator for Japanese households as real wages determine purchasing power for households and consumers in Japan.

It must be remembered that the 5.25 percent wage increase was/is mostly for large Japanese companies and small and mid-size companies probably got a little less and small and mid-size companies just don't have the resources need to pay the same wage increases.

Small and mid-size companies makes up about 70 percent of the total workforce in Japan so that means up to 70 percent of the total workforce might not have received a wage increase of 5.25 percent, which then means their purchasing power, to buy things in the Japanese economy is much less.

If consumer prices increased 4.0 percent that means maybe up to 70 percent of the Japanese workforce might have received something lower than 5.25 wage increases which means Japanese household might still be challenged with continued inflation.

And then add in the always needed or expected special earnings or bonuses and if they weren't what was expected that means again less purchasing power for Japanese households.

Most likely many companies might have used what they had on increasing wages, but when it came time to give bonuses in May or June, a traditional bonus time of the year, there were less funds than needed to give the normal bonuses this year.

Again, as a reminder maybe the large companies were able to give the usual bonuses but the small and mid-size companies just didn't have the resources needed to give the usual bonuses and maybe many of them used the funds they had on increasing what wages they could in April and again when bonus time came around there just weren't enough funds needed to give the usual bonuses.

Japan seems to have a two-tier economy made up of large size brand name companies and then another tier of small and mid-size companies that are operating on a completely different scale compared to the large Japanese companies.

Someone might say its that way in every major economy, but its not as some small and mid-size companies have equal footing in the economy such as in Europe and especially in Germany.

So Japan might be an economy of haves and have nots where the large Japanese companies have all the resources and maybe a lot of market power but the small and mid-size companies are always left behind as they just don't have the resources needed to be successful and or have a good footing in the Japanese economy.

Have a nice day!