Bank of Japan Past History? Updated August 15, 2024.

 

Optimism swept Bank of Japan as inflation goal looked nearer, yen weak in 2014

Article Source:  https://mainichi.jp/english/articles/20240716/p2g/00m/0bu/008000c

Ideas:

The optimism was good and needed in Japan, at the time, but maybe there were just too many factors that might have prevented Japan from achieving the 2 percent goal.

As always there are positives and negatives related to monetary easing, as its good for those who need loans, good for export companies, when the yen is not so strong, but not so good for importers and prices of import products.

Also maybe Japan needed someone to be optimistic when the Japanese economy is/was stagnant and not growing that much.

Inflation is neither good or bad as it, again, as both positives and negatives depending on what side of the coin you are on. For example, inflation might signal an increase in demand as companies see their products in high demand and they increase prices as consumers continue to buy more. 

But then there is the idea of inflation related to companies increasing price due to their costs increasing, such as the weak yen and increase import prices and companies passing-on their costs to the next in the supply chain, including the final retail customer.

The consumption tax or sales tax was a huge hit for Japanese consumers and they were not able or willing to continue to spend normally, and the Japanese economy took a major hit in 2014, and for the most part, really hasn't fully recovered.

It might take some time for the Bank of Japan to normalize its policy, as there are many variables that need to be un-raveled, related to the weak yen policy, and its not going to be easy or fast.

At the same, maybe the monetary easing policy was the correct choice for Japan, at the time, and maybe its was not a good choice for the US or the EU, at the time.

For example, flooding the Japanese economy with ample funds might have worked, in normal times, where more money was available and maybe as businesses and consumers began to spend deflation might have decreased, but that wasn't the case as maybe the factors or variables related to deflation and weak growth had been set many years before, and there were just too many factors that might have prevented to policy to work normally.

Inflation in 2014 and 2015 was not that much, as maybe not many noticed the increase in consumer prices. It might not have been until companies and their profit margins began to lesson and they then had no choice but to begin to pass-on their prices to the next in the supply chain including the final retail customer.

Maybe it wasn't until the pandemic hit that real inflation began to be noticed and by then, due to the weak Japanese yen, and Japanese households were finally feeling the inflation problem and it became a major situation in Japan.

It seems that while the Bank of Japan always had good intentions and what seemed like good strategies, for Japan, they were always a step or two behind what was really happening in the Japanese economy.

It seems like there was never complete agreement on what do to or what was happening in the Japanese economy. That's not a bad thing as its good there are always different ideas and opinions on what is happening and what do to do.

An economy, the Japanese economy, is like a living organism, and there are many parts, sectors, all moving at the same time, and as a result its hard to predict exactly what is the best strategy for an economy, as normal textbook ideas don't work sometimes in the real-world economy.

The idea of reaching the 2 percent target in 2015 was not overly-optimistic, as there might have have been some sign/factors that suggest it might have happened, but again, there might have been too many variables that had been set many years before the were just too entrenched in the Japanese economy that prevented it.

Its obvious that the fading effects of the weaker yen didn't happen and inflation continued on in Japan. Its hard to predict what is going to happen in the future, so the Bank of Japan can't be faulted for not getting its predictions correct.

It appeared the Bank of Japan was trying to figure things out but there were just too many factors that were preventing it from reaching its goal of 2 percent inflation.

So the only thing they did was to continue the ultra-easy monetary policy, as maybe they felt the Japanese economy was just too weak to handle a rate increase like in the US or the EU.

A positive cycle of wage increases and price increases might show that demand is up in the Japanese economy, but its very hard to predict exactly, and consumers might not want to spend, to boost the economy.

The Bank of Japan needs to find ways to eliminate its debt situation, but at the same time, not cause any challenges for the Japanese economy. 

Increasing the key interest rate might help but it might not help and there is no way to tell when it would help the Japanese economy.

The weak Japanese yen has been a challenge for importers and import prices, which then are passed-on to those next in the supply chain and eventually the final retail customer.

Consumer sentiment has never been a major economic driver in the Japanese economy like exports or the Japanese car industry.

The challenge is consumer spending is only around 50 percent of GDP while in other advanced economies its more like 60 percent of GDP.

Have a nice day and be safe!

Japanese Govt. To Keep Same Economic View: Updated Feb. 23, 2024

 

Japan keeps economic view as firms upbeat, inflation eases

Article Source: https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/038000c

Ideas:
The Japanese economy might be improving at a moderate pace, but what does the average consumer feel about the economy, related to inflation and prices?

Just what is corporate sentiment, and do all companies feel the same way, and some companies might b doing better than other companies, and the same with different sectors, some might be doing better than other sectors.

Are consumers prices increasing due to an increase in consumer demand or are consumer prices increasing due to companies continuing to pass-on their costs to the next in the supply chain, including the final customer.

Inflation might be slowing, but has it slowed enough to relieve the stress on households and their budgets?

Maybe, consumers are somewhat accepting with the idea that companies are passing-on their costs and again consumer maybe are OK with the idea and continue to spend and or consumers are resigned to the fact that prices are going to remain high and still continue to spend.

Maybe in May or June 2023, Japan completely lifted its pandemic restrictions and you would think by now consumer demand would have recovered back to normal. 

But consumer spending is never normal in Japan, as consumer spending is much lower than in the US due to several reasons such as an economy with a lot older citizens who tend to spend much less.

Consumer spending is about 50 percent of Japan's GDP, and maybe that is where is should be as Japan is a country of savers, as compared to the US as a country of spenders.

Economies go through business cycles meaning there might be quarters of positive growth and quarters of negative growth. A pause didn't mean everything or all economic activity has stopped, but maybe just slowed down to the point its now noticeable.

But it must be remembered, even though an economy has a quarter of negative growth, doesn't mean everything in an economy has stopped, as there might be some sectors with good growth and some sectors with less than good growth.

The July-September quarter might have been a challenging time as the weather in Japan during the summer saw record temperatures which might have limited travel or going out and doing things.

Also the hot weather in Japan continued well into September, as maybe consumer spending on fall or winter clothes might have decreased some too.

Most households and consumers probably don't pay attention to the financial and capital markets, as for the most part, they are not part of a households everyday life. The Japan stock market might be at record levels, but again, it doesn't reflect the real economy, which is households, jobs, and consumer spending.

Consumer sentiment might be both positive and negative as inflation is mostly an individual household situation, as maybe some households feels a lot stress related to increased prices and inflation, while some households might even notice the increase in prices that much.

Real wage growth, for the most part, has only affected the workers of large companies and not the 70 percent of workers in Japan who work for small and midsize companies, who didn't get a wage increase in April of 2023.

Consumer inflation might be slowing, but has it slowed enough to finally not have significant effects on consumers?

Fresh food prices are subject to changes in growing seasons and the weather, as this past summer was a very hot growing season, which might have limited the supply of some fresh food such as vegetables and fruits.

Private consumption or consumer spending might be "picking up" but is it sustainable over more than a quarter and can it last for a full year in Japan. Past data suggests its not sustainable as consumer spending is very fragile in Japan.

Here we see the word "pausing" again, which might mean business investment is never a monthly situation and always has periods of ups and downs, and that might have nothing to do with business or economic conditions.

Exports in Japan is a economic driver, which means it has significant effects on the growth of the Japanese economy. For example Japanese cars might be the main driver of exports for Japan.

The US Federal Reserve has not increased in key rate in months and plans to reduce the rate in 2024 as the US economy continues its strong recovery.

Yes, the Japan key interest rate and the US rate are far apart, which means the Japanese yen will remain weak and the US dollar will remain strong.

But a weak Japan yen is a boom for Japanese exports like Japanese cars, but not so good for Japanese importers, as Japan is relatively resource-poor country, which means Japan has to import much of what is needs and the weak Japanese yen, increases the price of imports in Japan.

The global economy is always in a "picking up" stage as there are always areas of good growth and areas of not so good growth such China at the present time, which is going through some restructuring of its economy.

Have a nice day and be safe!