BOJ and Possible Rate Increase: Updated Nov, 28, 2024.

BOJ chief signals further rate hikes to prevent sharp inflation

Article Source: https://mainichi.jp/english/articles/20241118/p2g/00m/0bu/015000c

Ideas:

The Bank of Japan, until recently has erred on the side of caution, and has not increased the key rate, until last summer, as they have considered the Japanese economy too weak to increase rates. 

But there is now a new governor for the Bank of Japan who seems to be taking a different approach as the previous governor didn't increases rates for a very long time.

What the Bank of Japan is not going to do is signal any real rate increase as they now it might cause havoc in the financial markets, like what happened last summer.

If the Bank of Japan does increase the rate, it might not be that much, for example from 0.25 points to 0.50 might be about right as they don't want the key rate to have any side-affects for the Japanese economy.

In years pasts, the BOJ was very concerned about the possibility of side affects so they erred on the side of caution and didn't increase the rate at all.

But because of the variance between the US key rate and the Japan key rate, for example  the US at maybe 5.0 points and Japan at 0.25 points, the large variance might be causing the Japanese yen to be as weak as it is.

Maybe the Bank of Japan knows it needs keep ahead of the curve, and increase the rate just in case inflation does begin to increase too much, as again, in the past the BOJ felt the Japanese economy was just too weak to increase the rate.

Again, in years past, as the US and the EU were increasing the key rate to decrease inflation, the Bank of Japan was not increasing the key rate, and the variance between the US and the EU and Japan has reached a level that it might be affecting the Japanese yen which is very weak and causing import prices in Japan to be higher than usual.

But the BOJ has only increased the rate once or twice maybe since last spring, so maybe December might be the correct time finally increase the key rate again.

The US economy has remained relatively strong compared to the rest of the world, but there is always the chance of inflation creeping up again, along other developments depending on what the new US administration does in the future/

And unfortunately, there seems to be the possibility of a new trade war between China and the US which could affect the Japanese economy as Japan and China trade with each other a lot.

And unfortunately, politics being politics, the new US administration might try to undo what of what the previous US administration did after the pandemic and try to take credit for any positives related to the US economy.

And yes, the weak Japanese yen as definitely affected the domestic Japanese economy and import prices which affect many if not all Japanese households.

What the BOJ doesn't want to do is look like or be is a currency manipulator which potentially could affect Japan's future credit rating.

It must be noted that 70 percent of Japanese workers don't work for large Japanese companies, which got the largest wage increases while the rest might have gotten much smaller wage increases.

And yes, companies need to pay for the wage increases so they have increased prices, which of course affect all and not just the large company workers.

It should be noted that inflation is not really a bad situation, as an increase in inflation could signal an increase in demand, and in Japan, which has been under a deflation situation for a long time, it might indicate a positive note for the Japanese economy.

The Bank of Japan's target of 2 percent inflation is sometimes a little unclear as they seem to not want inflation to be above 2 percent or they want inflation to be lower than 2 percent, which is what most economies want.

Quite possible they might feel if inflation does get above 2 percent that is a good indication the Japanese economy is starting to move in the right direction as there is now more economic activity moving through the Japanese economy.

The Bank of Japan didn't increase the key rate for maybe 10 years, as the had an ultra-low policy which they felt was needed at the time to stimulate the economy, get companies and households to borrow more and get more spending in the Japanese economy.

But for whatever reason, including the pandemic. the Japanese economy has been stagnant for a very long time and never moved out of its stagnation phase.

And again, inflation is not necessarily bad, it could indicate more positive economic activity taking place, with more demand for products, more spending by companies and households, which are all needed to get the Japanese economy moving again., and not jus companies passing-on their labor, energy, and material costs the next in the supply chain.

Have a nice day!

Japan's Real Wages: Updated Nov. 11, 2024.

Japan real wages in Sept. fall 0.1% on year, down 2nd month in row

Article Source: https://mainichi.jp/english/articles/20241107/p2g/00m/0bu/007000c

Ideas:

Wage increase in Japan usually only take place in April at the beginning of the new fiscal year, while inflation and prices increases happen anytime so no doubt real wages might have fallen behind prices in Japan.

Subsidies, are good and needed to help Japanese households, but they should only be temporary, at best in a market economy, but at the same time, inflation in Japan is not temporary and seems to be constant since the pandemic.

Wage increases should have been every year, and at a level that Japanese workers could feel good about the wage increases and then spent freely as needed.

Real Wages are what are important as real wages are wages without inflation and is what a consumer can use to buy things in the market place.

Again subsidies are good, but when they end Japanese consumers are back where they started as subsidies are only temporary and don't really solved the main problem of constant price increases.

The real challenge is the weak Japanese yen, which increases import prices in Japan, as Japan is a resource-poor country which put the Japanese domestic economy under a lot of stress.

But the real problem is the weak Japanese yen is good for Japanese foreign investments, Japanese exporters, and foreign tourists who go to Japan, as they have more purchasing power to buy things.

Average wages in Japan is for the average workers, most likely at a large company, while wages for 70 percent of the working population in Japan don't work for the large companies as they work for small and midsize companies who pay considerably less than the large Japanese companies.

And then there is the large group of contract workers in Japan along with the part-time workers who make even less and they are a large group of workers in Japan.

And at the same time many women, working women, especially working women with children might work for service type companies that have thin profit margins and make even less, which put as strain on Japanese families.

Prices increases of 2.9 percent don't seem like much, but you add that amount up each month it can be a large price increase for any Japanese household, especially the lower-income households in Japan.

This past summer, again was record temperatures in Japan, and of course Japanese households, especially in August during the month long holiday period people might have run their air conditioners a lot to escape the heat.

And or they might have tried to escape the heat and refrained from running their AC's too much and went the malls, if there were any, and stayed there during the day.

Most likely, Japanese companies might have used the summer bonuses on wage increases and companies just didn't have enough left to pay the usual summer bonuses.

In Japan, the salaries/wages are much lower than the US so companies makeup for it by giving workers two bonuses, one in the winter and one in the summer.

Real Wages are always adjusted for inflation and as inflation has been a constant in Japan since the pandemic real wages are been less for a very long time.

Have a nice day!

Japan Rice Prices Increase: Updated Oct. 31, 2024

Japan's 2024 new rice price rises to 31-year high after summer heat

Article Source: https://mainichi.jp/english/articles/20241019/p2g/00m/0bu/004000c

Ideas:

At some point governments need to implement temporary price controls on some essential everyday products such as rice, bread, milk and eggs. And then of course give temporary subsidies to producers or retailers of the products.

A price control means what is say, retailers and whomever can not increase the price more than the government mandated price that they think is needed to help citizens.

Also there should be price controls on these products if the growing season caused a significant shortage, and there should be a volume limit to be met for the price controls, and then of course give the producers a subsidy to cover their losses.

The Japanese government should due to maybe some not so good producers or other providers should monitor how much rice is actually supplied and its known, unfortunately, that producers will take advantage of a limited supply and try to price gouge the market, if not unchecked.

Rice is a major food product in Japan, and this past summer, friends of friends had significant challenges finding rice in the stores, because, as usual, there was a lot of hording before stores put a limit on how many bags buyers could buy at one time.

But of course, even then, some shoppers would go back the same day and try to buy more rice.

First off, there might have been 3 million foreign tourists in Japan in August and not all of them ate rice dishes, so it was unlikely, they alone would have caused a rice shortage.

Yes, of course, just like all businesses in Japan, production costs have increased as the weak Japanese yen might have caused production materials to be more expensive than usual.

And then there was the megaquake situation, which is normal, as some people might have gone out and tried to stock-pile needed products, including rice in August for fear of a possible earthquake.

People are going to people, meaning they have fears and worries so hording and stockpiling is a natural response to any situation sometimes.

But a government should try to help the citizens by finding ways to reduce stockpiling and hording as much as possible.

Have a nice day!

Japan Real Wages: Updated October 17, 2024

Japan real wages log 1st fall in 3 months amid continued price rise

Article Source: https://mainichi.jp/english/articles/20241008/p2g/00m/0bu/004000c

Ideas:

Wages increases in Japan are good and very much needed, but a 5% increase in wages is one time situation, usually in April, but inflation is not a one time situation as it can increase anytime as it as in Japan a lot since the pandemic.

Japanese households saw marked increase in June, but after June reality set in with more inflation after that which might have made the wage increase moot meaning the higher purchasing power only lasted a few months.

A 0.6 percent drop in real wages is really not that much, but for some it might a challenge to keep their heads above water as inflation continue to increase, but yes, at a slower rate.

Unfortunately, globally, just before elections politicians always make a lot of noise about what they are going to do, but in reality, some or many always do something different, as the situation in office is always different than what they can really do.

Consumer spending in Japan is never where is should be, as Japanese consumers just don't spend like US or even EU consumers, as they are more savers. In itself that's not a good or bad thing  but different cultures do different things, as the average Japanese consumers just doesn't go on big spending sprees like maybe in the US.

There is a definite labor shortage in Japan now, as there was recent article about some/many companies going bankrupt because they couldn't find the workers they needed because they were unable to meet the new demands of workers who want higher wages.

Price increases might be slowing, but are they slowing enough so that the average Japanese consumer can feel anything good from the recent wage increases.

Nominal wages are just wages including inflation, so they really don't mean much for the average consumer.

Subsidies are good but they shouldn't be depended on for a long time as they are meant to be a short-term help, but the market, if all possible. should be able to control inflation, which it hasn't in Japan for a long time.

The average wages of 3.0 was good, but the problem is inflation continues to increase every month, for example 3.5 in August and 3.2 in July etc. 

So even though Japanese workers see an increase in wages, usually just once in April, inflation continues to increase every month. Bonuses are good but they don't happen every month usually just twice a year in Japan.

So, again,  a wage increase of 3.0 is good, but inflation increased 3.5 and 3.2 respectively, and that just the months shown here, as we most likely it was the same or similar in other other months too.

Nominal wages really don't mean much as its real wages that are important. Nominal wages are wages not adjusted to inflation, so inflation might be part of the nominal wage.

Household spending or consumer spending is never where is should be in Japan. And as inflation continues to grip the Japanese economy, consumers in Japan, as anywhere, continue to cutback on their spending.

Of course maybe the hot summer months might have had something to do with the decrease in spending as maybe consumers didn't go out as much, as or they went to the malls to get out of the heat, but still didn't spend that much.

The typhoon situation in Japan is always going to reduce some economic activity, and this season was no different. And then add in the earthquake advisory and that made people even more cautious about what do to. 

Household spending supposedly makes up about 50 percent of Japan's GDP, but in reality, Japanese consumers don't seem to be spending that much since the pandemic as inflation seems to have curbed spending, and not even after the pandemic or even before the pandemic Japanese consumers haven't been spending like they do in the US or in the EU.

Japanese households have always been more savers than spenders as saving is a big part to the Japanese culture, but for Japan to get out of its current stagnation, there needs to be a better balance and not just all savings but some spending too in the Japanese economy.

Have a nice day!

Japan Households Spending: Updated September 9, 2024.

 

Japan household spending in July edges up 0.1% amid wage increases

 Article Source: https://mainichi.jp/english/articles/20240906/p2g/00m/0bu/005000c

Ideas:

Possibly the wage increases are just beginning to have an affect on Japan household spending, but to be fair, there is not a super surge in spending as maybe inflation is sill part of the picture in the Japanese economy.

Yes, again, the inflation situation is having a real affect on the Japanese economy, as consumer spending in Japan, is maybe 50 percent of GDP, but it can't be seen because of the inflation situation and the weak Japanese yen, which increases import prices too much.

Even at 0.1 percent that is with the margin of error, so it  quite possible there wasn't much of an increase related to Japanese household spending.

Average spending is just an average and really doesn't give a good spread or variance to see what was the highest amount and the lowest amount. 

Most likely unfortunately, the lower income groups might have spend much less and they have less income to use for everything.

An economy is not just made up of the middle class or even upper middle class, but the lower classes too, and unfortunately, the lower class income group is getting larger in Japan each year.

Housing outlays usually are not an everyday thing so some months might be more than other months depending on the mood of the households.

Of course TV's would be bought to watch the Paris Olympics, just like during the Rugby World Cup or the World Cup, when Japan is involved, new TV's are bought, even though they might not need a new one.

Package tours surged which indicates, the pandemic has finally been put to rest and people are moving around Japan and even going on overseas trips despite the weak yen, which decreases the purchasing power of Japanese travelers in overseas markets.

Perhaps the wage increases in April are finally being felt by Japanese households and they are seeing the affects and finally beginning to spend some again, despite the inflation situation and the weak yen situation.

Of course, as inflation continues Japanese households have been cutting back on food that is expensive for them. Most likely some food is elastic meaning as the prices rise too much, consumers decide they don't want to buy it and of course choose chicken instead of beef and pork.

And as the Japanese government reduced or eliminated the energy subsidies, Japanese households cut back, when they can, to reduce expenses.

It might be worse for the lower-income groups, as they spend more on food for the amount of money they have, which means they are looking for substitutes as they can't afford the normal prices on food.

Its natural that consumers are becoming more selective as inflation continues in Japan, and yes, consumer spending might be recovering, but its never been that strong in Japan compared to the EU or the US.

Perhaps, due to inflation Japanese households are still holding back on spending, and, again, are being very selective and not just going out and spending all of their wage increase.

Household spending or consumer spending,, again, has never been that strong in Japan, and with the pandemic and now inflation, and the weak Japanese yen, Japanese consumers just not spending like US consumers do.

Have a nice day!

Japan Core Consumer Prices: Updated August 25, 2024.

 

Japan's July core consumer prices up 2.7% on higher energy costs

Article Source:  https://mainichi.jp/english/articles/20240823/p2g/00m/0bu/018000c

Ideas:

Inflation just continues on in Japan, but its probably the same everywhere in the world at this time.

The Bank of Japan has been trying to get inflation to the 2 percent level for many years without much success.

Some might think 1.9 percent is not that much except when its 1.9 every month it begins to add up over many months and many years, especially for low income and fixed income groups.

The Bank of Japan, while it might be trying it hasn't been very good at curbing inflation or slowing down inflation. But to be fair not much can really be down, as even in the US, while interests were increased, it might have not been a reason for the decrease in inflation.

The weak Japanese yen, is another challenge for the Bank of Japan to solve but so far it has been able to do much. The weak yen has some positives and negatives, but for the Japanese domestic the weak yen pushes up prices and Japanese importers have to pass-on their increased costs to the next in the supply chain, including the final retail customer.

Energy prices globally might be up, but Japan should try, if not yet, to enter into some FTA's with some energy producing countries as a way to reduce import energy prices, as Japan is resource poor country and has to import much of what it needs.

A 22.3 percent increase in electricity, this time of year, during the summer, is probably worse than a cold winter for most in Japan, as now Japanese households have to run their AC's a lot but, like a recent article said, many single family households and maybe many fixed income households have tried to not use their AC's that much to reduce expenses. 

Food prices are another challenges for Japanese households and now, because of the news about a big earthquake has been mentioned a lot in the media there is now a shortage of rice in Japan and rice prices have skyrocketed as people have horded rice in the supermarkets.

And of course rice and other staples are subject to the growing season and if the growing season has some challenges such as a hot summer, the supply might be less, which means of course prices have gone up. 

I doubt, to be fair, that increased consumption of rice by foreign visitors is/was enough to drive up rice prices in Japan, as most likely the not so good growing season was the biggest factor for the increase in rice prices, as the number of foreigners is increasing, is not enough to have an impact on the rice market in Japan.

And yes, maybe many Japanese households bought new AC's because of the summer heat, so maybe Yodobashi Camera, a big electronics company in Japan has had good sales this summer in AC's.

While the Bank of Japan might be considering a rate increase, recent articles have said the BOJ is probably going to wait until the financial markets, in Japan, and globally,  calm down, as the US economy had some not so good news about its economy, but now it seems to be OK, but the BOJ is probably going to wait more.

Most likely, if there is a rate hike, it will be in October or November at the earliest, as even the hot summer is causing challenges for the Japanese economy, along with it being the typhoon season, which means more havoc for the Japanese economy.

The Bank of Japan never wants to upset the financial markets, so most likely they need to communicate what they are going to do with regards to a rate hike or decrease in the future.

The currency market is a different situation compared to the stock markets, both in Japan and globally, as the currency markets or markets usually are not as volatile except in this case the Japanese currency market, lately has been quite volatile.

The coming months are going to be very interesting as its the typhoon season, there are record hot temperatures in Japan this summer and the Japanese economy has not grown that much recently, and then add in the rice shortage, so the coming months will be interesting.

Have a nice day and be safe!

Japan GDP Increases: Updated August 27, 2024

 

Japan's GDP grows 3.1% in April-June as consumption rebounds

Article Source:  https://mainichi.jp/english/articles/20240815/p2g/00m/0bu/006000c

Ideas:

Japan's GDP seems to be on roller coaster ride lately with a couple quarters up and then a couple quarters down, as it not very consistent.

The inflation-adjusted annual rate is just what would happen if the Japanese economy grew at the same rate each quarter, but that is usually not the case as its often very inconsistent.

Private consumption or private spending is never where it should be in Japan as Japanese households never spend like US consumers, as Japanese consumers, for the most part, are more savers then spenders.

Capital spending by companies is usually related to business sentiment, and how businesses feel about the future.

While the Japanese government gave subsidies and tax cuts of 40,000 yen, it doesn't go that far when inflation increases every month, and the 40,000 can be used up very fast in one month.

Japan, for many years and maybe decades didn't see much inflation, so its probably been hard for Japanese households who were more suited to deflation or decreased prices.

Again the stronger-than-expected GDP growth, while not be negative, is not usually the situation in Japan, as the Japanese economy has been stagnant for a very long time.

The auto scandal related to auto testing discrepancies might have abated but the auto industry is going to be watched more closely for now on, and the Japanese government doesn't want another industrial scandal in Japan.

Ever since the pandemic prices have continue to increase in Japan, and it seems, at this time, there is no end in sight for the decrease in prices or even the leveling off of prices.

Domestic demand has never reached it full potential in Japan as, again, Japanese consumers more savers and not big spenders like US consumers.

Private consumption or consumer spending is never that strong in Japan, and recently because of continued inflation, its even less strong.

It might account for half of Japan's GDP, but most likely the level of spending in Japan is never that much, or never that much recently.

Strong demand for cars, while good, is never an everyday thing, as durable goods, such as cars, are not bought everyday but maybe just every few years, if even that.

Capital spending is sometimes hard to figure out as what are companies in Japan doing exactly. For example there is a so-called labor shortage in Japan, and are companies trying to increase their hiring, or are they just tying to use automation to overcome the labor shortage?

Ordinary people sometimes might feel disconnected from all of the news about increased exports and a strong trade surplus, as sometimes there seems to be two different economies related to Japan, one being export and the trade surplus and other being the high prices due to the weak Japanese yen, and which is causing import prices to be high.

Wage increases are good and needed, but the challenge is as 70 percent of most Japanese don't work for large name-brand companies, the small and midsize workers might not have gotten the same wage increases, which means consumer spending might not be where it should be.

But that is a market economy where not everything is equal and there are some who benefit and some who are not so well off.

Prime Minister Kishida can ask companies to increase wages, and some have or many have, but the challenge is maybe some companies and their profit margins just can't handle any real wage increases as they are struggling with high energy and raw material costs.

And then add in the so-called labor shortage, which means companies now that to pay even more for workers and there is a competition for the best talent available in Japan.

The 40,000 yen income tax cut and or subsidy, again, doesn't go very far and inflation can eat into the 40,000 very fast in Japan.

There was strong wage growth for large companies in Japan, but maybe not for the small and midsize companies in Japan, as the most likely got lower wage increases.

And then there is a huge segment of part-time workers and contract workers who never get the same benefits and large company workers so they might have gotten even less in wage increases, if anything at all.

Demand for cars in the US continues to be strong, as the news of a  possible recession was muted with new data so the US economy continues to be the strongest economy in the world at this time.

The Japanese economy seems to be stuck or stagnant for many reasons, such as the low birthrate, lack of favorable immigration policies, and the lack of productivity or innovation among the traditional Japanese companies.

Most likely the high-tech companies are doing their part in increasing productivity and innovation, but the problem seems to be the large traditional companies which are dragging down the Japanese economy.

Maybe it was inevitable that Japan would lose its 3rd place to Germany or any other country, as maybe the US would lose its place to India or China in the future.

Have a nice day and be safe!

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!

Bank of Japan View: Updated July 12, 2024

 

Bank of Japan ups econ views on 2 areas despite inflation, weak yen

Article Source:  https://mainichi.jp/english/articles/20240708/p2g/00m/0bu/028000c

Ideas:

All economies have different regions which produce more than other regions and Japan is no different. Tokyo might be the financial center of Japan, Osaka might be business hub, and Nagoya is definitely the manufacturing hub of Japan. while the other regions in Japan, no less important, contribute in many different ways.

Most economies, including the US are a mixed picture as California might be a significant economic driver in the US while the deep south area of the US might not be so much. However it seems Texas is becoming like California in many ways.

Private consumption might be resilient, but is it resilient in all areas of Japan, it all regions in Japan these days. Private consumption or consumer spending is always a challenge for the Bank of Japan.

Wage increases seem to be increasing but are Japanese households spending or are they just saving?

It might take some time for the Hokuriku region to fully recover and get back to some kind of normal, as it seems there are a lot of small and mid-size businesses, mostly suppliers, in that region.

The Kinki region seems to be doing very good doe to the increase in foreign tourists in Japan, and the weak Japanese yen.

The challenge, these days, is some local Japanese might be getting tired of all of the foreign tourists, as there are some who don't have good manners or follow the rules, and or leave trash everywhere.

But of course, back before the pandemic, many Japanese tourist spots became too dependent on foreign tourism, especially from China, and when the pandemic hit, many of the tourist businesses in Japan were hit very hard and had to close and or layoff workers.

The Japanese car industry, which was hit by the safety data scandal most likely will be OK, and the Japanese car industry is the main economic driver for the Japanese economy, and demand in the US for Japanese cars remains very strong,

The Hokkaido and Shikoku regions are not strong economic drivers in the Japanese economy, and in this case a region that is a economic driver produces a lot and significantly contributes to the Japanese economy.

As such, maybe consumer spending is much less in those regions than other regions in Japan, as maybe there are not a lot of large or major companies in those regions.

An economy is very complex, and usually not all parts of an economy are all running the same, as some will be better than other areas, such as some sectors might be doing very  good while some sectors might not be doing so good.

The weak Japanese yen is both a negative and a positive in most economies. For example, the weak yen is a positive for Japanese export companies as they can more for their products, for example in the US.

And of course it brings to Japan many foreign tourists as the weak yen give foreign tourists more purchasing power and they can spend more in Japan, which of course is very good for the Japanese economy.

The weak Japanese yen is a negative for the Japanese domestic economy and Japanese import companies, as Japan is a resource-poor country and has to import much of what it needs from food, raw materials to make products, and energy products too, as the weak yen increases the prices on imported products.

The Bank of Japan, might have its meetings, but its not going to do anything too drastic, as they don't want to upset the financial markets with anything that is not normal or might cause some side-affects in the Japanese economy.

Wage increases, which came about in April, for the most part, maybe are beginning to see of ripple effects in the Japanese economy as Japanese workers might be starting to spend more as they feel better about their wage increases.

However, it must be remembered, most workers in Japan don't work for large name-brand companies, but small and mid-size companies as they probably didn't get the same wage increase as the large company workers did.

Which, means, like any market economy, the Japanese economy is an economy of haves and have-nots which could be factor in consumer spending in the Japanese economy.

Have a nice day and be safe!

Japan Real Wages: Updated July 9, 2024.

 

Japan real wages down 1.4% in May, 26th monthly fall despite hikes

Article Source:  https://mainichi.jp/english/articles/20240708/p2g/00m/0bu/014000c

Ideas:

Japan's real wages are just wages against inflation, which it looks like wages are decreasing since inflation causes less purchasing power related to any extra income Japanese households have.

While wage growth is good, the challenge is wage increases only happy in April, for the most part, while inflation could be every month, which makes the wage increase difficult to keep up with inflation.

It could easily be thought that some price increase are not relevant to me, as I don't buy any of the products that have increased, but in a large economy like Japan, there have been increases in many different products and prices increases eventually will begin to affect everyone.

The average wage increase might have been 5.1 percent, but it must be remembered that most likely that was large Japanese company wage increases and not small and midsize companies, which might have given much smaller wage increases.

For example maybe some 70 percent of Japanese wage earners don't work for large name brand Japanese companies, which means up to 70 percent of Japanese wage earners are still feeling inflation more than the large company workers.

But that might be what a market economy is all about, the large companies have more resources, and the small and midsize companies have to make do with what they have.

A ripple affect might have begun, but will it become a positive factor in all of the Japanese economy.

But again, as the wage increases were not the same for all Japanese companies will wage earners working for the small and midsize companies begin to spend like the wage earners in the large companies, or will the Japanese economy remain an economy of haves and have nots.

It might be too early to tell, as even the May to July period might not see a lot of spending as wage earners/Japanese households might be waiting to see if inflation is really going to decrease in the coming months.

Until there is significant decreases in inflation, consumer spending in the Japanese economy might not be that much at this time, even though there were some good wage increases.

High utility and food costs are costs that might cut into a Japanese households discretionary income and most likely households might not reduce or cut their utility usage, most likely they might cut back on the type of food they buy especially higher priced fruit and vegetables.

And now, as hot weather has again returned to Japan, most households are probably going to run their air-conditioners a lot, and or, as needed, go to any mall type places where they can spend the day, especially on the weekends.

Again, wage increases were good and needed, but it still might not be enough to get Japanese households spending in the Japanese economy, just yet.

The Bank of Japan can use all the slogans they want but the real variance is what do Japanese households or Japanese consumers feel with the wage increases. Are they enough to get them out spending again.

The Bank of Japan and the US Federal Reserve have used different strategies to reduce inflation and get their respective economies moving again.

The US strategy seemed to work, for the most part, while the Bank of Japan's strategy might have been to just let inflation run its course and not do anything that might cause any real side-affects to the Japanese economy, or something like, "do no harm" to the Japanese economy with our strategies.

As in any market economy, there is a big difference between full-time wage earners and part-time wage earners, but the difference might be too much in Japan, as there are a lot of part-time wage earners, maybe more than other advanced economies. 

Many or most of the part-time wage earners in Japan might be woman and or women with children, who might need to work part-time and still take care of their children,

The challenge or problem is maybe many of these women might want to work full-time jobs but the Japanese work environment might not be good for them as women with children and full-time career track jobs are not easy to find or companies willing to accommodate women with children.

It seems the trend, globally, is not a reduction of work hours, but work hours might be trending upward due to complexities in work and work stress in today's global work world.

The construction industry might have needed to increase wages due to the labor shortage and to get good reliable workers they need to pay good salaries, as maybe young Japanese workers don't want to work in the construction industry these days.

While compound services might be related to transformations related to work and demand for their services, and as such they might not need as many workers.

Have a nice day and be safe!