Japan Nov. Inflation. Updated Dec. 23, 2024.

 

Japan inflation accelerates in Nov. on reduced energy subsidies

Article Source:  https://mainichi.jp/english/articles/20241220/p2g/00m/0bu/005000c

Ideas:
If the Japanese government has reduced subsidies for utility bills and rice that means, most likely for most Japanese households they will have less disposable income which of course could mean less consumer spending in the Japanese economy.

Increased inflation at 2.3 percent or 2.4 percent, might not seem like much, but for the low-income groups could be a major challenges related to disposable income or other spending they might want to do.

The Bank of Japan might want to stick with its target of 2 percent inflation but it doesn't seem to be doing much to get inflation under 2 percent. But that might be a strategy to not interfere in the natural situation of the Japanese economy, preferring to let inflation decreased on its own.

The Bank of Japan is very cautious and moves very slowly and probably will not make a move that could upset the financial markets in Japan and globally.

Inflation increasing from 2.3 to 2.4 percent is not that big of a change, as especially if it was related to the decrease of energy subsidies earlier.

Once again, the Bank of Japan moves very slow and says it wants to analyze more wage data which indicates its not ready to make a move just yet.

And yes, the next rate increase could be January, but at the same time, if anything unusual happens before then the BOJ don't hesitate to delay the next rate increase.

Japanese households again have to deal with the energy price increases which means their disposable income will be even less, which means less spending in the Japanese economy.

Whether conditions always plays havoc with the prices of produce and the hot summer in Japan played a big part in the reduced supply of rice.

And yes, farmers too have passed on their higher production costs to the next in the supply chain including the final customer.

And lets not forget the increase in prices of coffee and chocolate as producers and wholesales too passed on their increase in material costs to the next in the supply chain including of course the final customer.

As food prices, either at restaurants or supermarkets increase, Japanese consumers will either cut back or they will try to find substitutes that meet their expectations.

The lower-income groups will be hit even harder as they use more of the income for food than the other groups.

The upper-income groups might not even notice the price increases and or they don't care, as it probably doesn't affect them that much.

Household durable goods are not an everyday product and is only bought maybe once a year if even that.

Someone could take this two ways about in the increase in service prices, such service providers had to increase prices to cover the wage increases they needed to give their workers in the regular wage negotiations last April.

And or service providers had to increase wages for new hires as there is a labor shortage in Japan and as there are more jobs available to choose from, they had to hire new workers at a higher wage than normal, and they then had to increase prices to cover the wage increases.

Have a nice day!

Japan Core Inflation: Updated April 17, 2024.

 

Japan's core inflation accelerates again to 2.8% in Feb.

Article Source:  https://mainichi.jp/english/articles/20240322/p2g/00m/0bu/008000c

Ideas:

Most central banks, like the Bank of Japan, want to keep inflation between 2 and 4 percent, as they feel its manageable. If inflation is only 1 percent, it might mean there is not enough economic activity in an economy. If its about 4 percent, or more, it might mean inflation is too much and prices are too much for regular households.

Government subsidies can only do so much or only cover so much, as governments can't do everything to help society or the economy.

The reason fresh food is excluded in more core consumer price indexes fresh food can be very volatile, meaning prices can change a lot depending on supply and demand.

Inflation sometimes, like it can have a mind of its own, meaning once it start to increase or accelerate, its hard to slow it down.

Core-core CPI might be slowing but most likely, its still too high for many Japanese regular households, and definitely too high for fixed income households.

The Bank of Japan seems to be relying on Japanese companies to increased wages above the inflation level, but the challenge is getting all Japanese companies, large, midsize, and small companies to increases wages.

Last April, 2023, it was reported that mostly large companies increased wages but not many small and midsize companies were able to increase wages for their employees.

If all companies don't increase wages there is going to be a two-tiered system of wages in Japan of haves and have-nots over time.

Even though Japan has used an unorthodox strategy to try and end deflation, to be fair and honest, it doesn't seem have helped that much. But the same can be said about the US and its increased in the key interest rate, and maybe it didn't really lower inflation that much too.

Food prices can be attributed to the weak yen, less than good growing seasons, and overall general inflation and companies increasing prices.

Durable good prices might be attributed to energy and or material price increases as companies pass-on their costs to the next in the supply chain.

Cost-push inflation or companies passing-on their material or energy costs is now a common situation in Japan, for many years, companies were reluctant to pass-on their costs to the next in the supply chain, including the final retail customer for fear of losing a significant number of customers.

Energy prices are subject to global energy prices and the weak Japanese yen, as Japan is a resource-poor country and has to import much of what it needs.

It seems, maybe, Japan doesn't have any trade agreement with energy producing countries, which maybe can help in reducing its energy costs.

Services, in Japan, were hit hard by the pandemic with many layoffs and closing of businesses, and maybe many service companies have not been able to get back to a staff level like before the pandemic as maybe some or many former employees have moved on to other jobs in Japan.

At the same time, maybe many service companies have increased their fees to try and makeup for losses during the pandemic. And also at the same time, maybe service companies have had to pay higher wages just to get their staff levels back to normal.

Inflation might be slowing in some products in the Japanese economy, but again, inflation might still be too high for many in the Japanese economy.

Again, accommodation companies such as hotels and even restaurants might be increasing their prices as a way to makeup for lost profits during the pandemic period.

And also, as demand increases from an increase of foreign tourists, its only natural that some businesses will increase their price to take advantage of the increased demand.

And again, all Japanese companies, large, midsize, and small need to cooperate with wage increases so that all wage earners in the Japanese economy can benefit.

The Bank of Japan is going to keep its strategy of twerking the Japanese economy, as needed to make sure the economy can finally get out of its deflation state and inflation state, and its like a two-edged sword that the Bank of Japan has to deal with at the same time.

Have a nice day and be safe!