Japan Minimum Wage Increase: Updated August 3, 2024.

 

Japan gov't panel OKs sharpest minimum wage rise amid inflation

Article Source:  https://mainichi.jp/english/articles/20240725/p2g/00m/0na/002000c

Ideas:

Minimum wage hikes are good for workers but not so good for companies, as many of the companies are small companies with few resources and or service companies with limited or very thin profit margins. So maybe a 50 yen increase in the minimum wage might be too much for many companies.

But for workers even a 50 yen increase might not be that much as inflation can eat that up in one day, as the minimum wage needs to be higher, but like some countries the minimum wage it not that much.

Unfortunately, minimum wage workers, might not be the most talented or the most skilled in the work force in Japan, like other places in the world, but they might have families or bills to pay and the minimum wage doesn't go very far.

There has always been a debate related to the minimum wage as many companies around the world don't want to pay that much, and Japan is no exception to the situation, as again, the minimum wage worker might not be the most talented or the most skilled but they provide needed work for an economy.

Inflation will always outpace wage increases as companies are very reluctant to increase wages and they have to have an incentive to increase wages. Look how long its taken for Japanese companies to increase wages ever since the Toyota group effect in the early 2000's that said no wage increases and then all companies did the same thing.

Service companies might always be the last group to increase wages, as their profit margins are very thin and they really can't afford to give the needed wage increases, as most of the workers might be contract or part-time workers.

Real wages are more important than nominal wages as Japanese workers feel the affects of real wages against inflation, as the value of real wages can diminish with inflation increases.

The minimum wage in Japan, is much lower than other country's minimum wage, as maybe the minimum wage worker is not as valued as an worker as in other countries.

Most likely, many of the minimum wage workers, in Japan, might be women who have children, and can only work a few hours each day, and of course maybe students who can only work too a few hours a day.

Each Japanese prefecture might set it minimum wage based its overall economic activity, as of course Tokyo and Osaka might have the most economic activity and their minimum wage might be the highest in Japan, while the smaller provinces which are more rural, with less economic activity might have a lower minimum wage.

Which of course might be one of the reasons many young people in the rural provinces are leaving and moving to the more economic active areas of the country, where the wages are much higher, even for minimum wage workers.

The minimum wage situation is neve going to be solved as long as companies are reluctant to give good wages to the less talented and or less skilled in a society or economy, as it going to always be an issue.

Have a nice day and be safe!

Bank of Japan Keep Policy Unchanged: Updated April 19, 2024.

 

Bank of Japan steady on rates ahead of wage talks, more upbeat about inflation

Article Source: https://mainichi.jp/english/articles/20240123/p2g/00m/0bu/035000c

Ideas:

It seems the Bank of Japan is relying heavily on Japanese companies to get the Japanese economy moving again, with the spring/wage increases.

The challenge is for all companies, large, midsize, and small to cooperate and give wage increases. If only large companies participate, and not enough small or midsize companies participate, again, its going to be an unbalanced economy of haves and have nots in the future.

The ultra-easy policy might change, some, in the future, but until the Japanese economy is totally clear of de-flation and stagnation, the Bank of Japan is not going to do anything really drastic anytime soon.

Communication and what language is used by the Bank of Japan is very important, as financial markets seem to hang on every word central banks, around the world say or communicate, so they are very strict on what they and try not to cause worry in the financial markets.

It takes time, a lagging effect sometimes, for high prices to come down, and even though global prices might be slowing, it takes time to reach the relevant markets globally.

Even at 2.4 percent, it might still be too high for some Japanese households, especially fixed income households, who tend to spend more on food than the upper-income groups.

Again, maybe the Bank of Japan is putting too much emphasis on wage increases, as maybe some companies don't have the resources or the means to meet the Bank of Japan's wage goal.

Many small and midsize company's profit margins have been compromised over the last three years because of the pandemic and or increased energy costs, along with increased raw material costs.

But then again, it has been suggested, that some large Japanese companies have been sitting on huge sums of cash instead of using it for their employees or capital investments.

Being less sensitive might mean less elastic, meaning they are not changing much due to increases in material, labor, or energy cost increases.

Most likely, compared to goods-based companies, service-based companies might be more reluctant to increase prices, at this time, as they are concerned about getting their customer base back to normal after the pandemic.

Financial markets are always watching what central banks say and do, as markets can change very quickly on what is said and done.

The Bank of Japan, even when it says its going to end the ultra-low policy, at the same time, its going to continue to monitor the economy and not make any major changes, such as increasing the rate, which might affect higher borrowing costs.

The Bank of Japan is not going to follow the US or the EU will drastic key interest rate increases, as if they did it would go against much of what it has tried to do the past seven years.

Even if and when the Bank of Japan does makes changes in its ultra-low policy, the public or even companies might not see much of the change, as the changes might be so miniscule no one will notice much, in the beginning.

There could be some real side-affects to a key interest rate hike, such as increased loan costs, increased costs for those who have loans, increases loans for companies and so on, all of these and many more could affect extra household income on the future.

Real wages, which is adjusted for inflation, means wages are less because of inflation and households have less extra or disposable income to work with in paying their bills.

A once-in-a-lifetimes situation might not be all that important, as governments and central banks need to be careful not to use too much control or power to influence a market economy.

Yes, some governments have more guidance than other governments such as in the EU, but they've had policies in place for decades, if not longer, and seem to be working.

In this case, perhaps deflation can be used to describe the wage situation of Japanese households where wages of Japanese workers/households have been deflated, have decreased, along with less purchasing power for many years.

In just the last couple of days, in April, the US Federal Reserve has suggested that it might not cut the key rate anytime soon, as inflation in the US economy is not decreasing as fast at the US central bank wants.

As a result, the Bank of Japan might have more time, for example, maybe in the fall of 2024, the US might cut it rate. 

And just the past few days, both the US, South Korea, and Japan has agreed, in communication to deal with the currency exchange rate situation, but exactly how remains to be seen.

Until see some real signs of wage increases from all Japanese companies wages are going to remain deflated, meaning less purchasing power for Japanese households.

Have a nice day and be safe!

Japan Business Lobby Calls For Wage Hikes: Updated on April 1, 2024.

 

Japan's biggest business lobby calls for larger pay hikes than 2023

Article Source:  https://mainichi.jp/english/articles/20240116/p2g/00m/0bu/050000c

Ideas:

The Japanese Business Federation asks for higher wage increases, but are companies required to follow the county's most powerful suggestion.

There might be many companies willing and able to give wage increases more than 4 percent but maybe not all companies can do it because of compromised profit margins.

But will 4 percent be enough to solve the inflation and stagnation challenge in the Japanese economy. Yes, companies can't do everything related to inflation and the stagnation in the Japanese economy, but it seems the Bank of Japan seems to be relying on companies to solve the inflation situation.

And then there is challenge of when companies do increase wages, they have to pay for the wage increases somehow, and most likely they will increase the prices of their products, which could in effect, be more inflation.

Real wages and consumer demand or consumer spending is the "real" economy in Japan and its not the Japanese stock market or big companies.

For the most part, most of the Japanese wage earners don't work for large Japanese companies, but small or midsize companies, and many of them didn't give wage increases in April of 2023.

Some articles, in recent years, have suggested, many large Japanese companies were sitting huge sums of cash and not using for capital investments and or wage increases for their employees.

In recent years, maybe it started during the lost decade of the 1990's, but large Japanese companies seemed to become risk adverse and didn't take risks like companies did in the 60's 70's or even 80's.

The Japanese economy, overall, is in a position, that it might be left behind among advanced economies if wage increases are not implemented, and not just by large companies but also by small and midsize companies too. 

Japan is in a position too, to become a second-tier advanced economy if changes related to wage increases are not implemented correctly this year and the next year too.

The Bank of Japan and the Japanese government can only do so much as most of the burden has to be on Japanese companies to lift the Japanese economy out if its current situation with large wage increases and again, all Japanese companies need to increase wages.

But the Japanese government should help small Japanese companies with subsidies, as needed to help with their profit margins and wage increases.

Productivity is lacking in many Japanese companies, as they are down the list of OECD countries and productivity. For too long Japanese companies have not sought improved productivity, maybe thinking it was too expensive or too hard to implement.

And again, the lack of productivity in the Japanese economy, might turn Japan into a second tier advanced nation, if it isn't already, if changes in productivity is not implemented.

Yes, companies should decide what's best for them related to wage increases as not all large companies are as profitable as some of the name-brand large Japanese companies.

For too long, many large companies, and maybe in Japan too, have too much market power, and as a result dictate to small and midsize companies prices for parts and so on that big companies need, at the expense of compromised profit margins of the smaller companies.

Unfortunately, even though its illegal, many large companies still have too much power over small and midsize companies when it come to parts parts prices that large companies need, and they have ways to circumvent the laws.

Maybe a 5 percent increase is good and needed but maybe many big companies might think its too much and instead might be thinking more in the 4 percent range.

Labor unions, globally, always set the demand higher than what they think they can get and then negotiate what might be more realistic after.

And this it a classic case of a labor union probably doing just that, as they know 5 percent is out of reach for what most big companies are going to give.

But you never know, as for example the Ford motor company in the US gave in to the demands of the labor union and met its wage demands after many weeks/month of strikes.

But of course Japan is a different culture and situation as labor strikes almost never happen in Japan as labor and management seem to work together more closely to solve the challenges both are facing.

Have a nice day and be safe!

Japan Household Budget Challenges: Updated March 3, 2024.

 

Japan household budget burdens to rise by $200 per person in 2024: estimate

Article Source: https://mainichi.jp/english/articles/20231230/p2a/00m/0bu/025000c

Ideas:

Maybe spread out for a year $200 might not be that much, but then again, for some Japanese households it might be too much with the continued inflation situation.

Real wages like the real economy is what is relevant for the average Japanese household, as GDP, record high stock market might not mean anything to the average Japanese.

But then again, inflation and budget concerns are very much individual from household to household, and of course it depends on how each household spends and how much are their costs related to energy, grocery shopping and so on.

The flat tax cut sounds good, but is each household going to get the tax cut in cash of is it just a tax cut in the taxes each person or household usually pays?

A cash handout of 40,000 yen would be good, but if each household could get it the cash and then they could use how the think is best.

Inflation slowing from 3.1% to2.4% might not even be noticeable for most households as maybe don't follow or think about how much inflation really is but in real terms, how much they have to pay related to food purchases and energy payments, then yes then they see it going up and maybe down in 2024.

The Japanese government should keep the energy subsidies through 2024, along with the tax cut and handout to low-income families as a way to really insure that inflation is finally lowered.

And of course, if wage increases are significant enough in April 2024, which might mean consumer demand and consumer spending might get back to some kind of normal.

But all companies need to increase wages and not just large companies, but small and midsize companies too need to do what they can.

Price controls are good, for example on daily necessities such as milk, eggs, flour, but can't be used for very a long time as they disrupt the normal flow of a market economy.

Japan is a resource-poor country and has to import much of what it needs, and of course is subject to global prices and then the variance between the US key rate and the Japan key rate has made the Japanese yen very weak, which means import prices are very high in Japan.

Even though the US hasn't increase its rate for three consecutive meetings, the variance is still very high at this time.

The Bank of Japan might be signaling it might begin to think about how to change it ultra-low policy, but as we move into 2024, the news is the Japanese economy has slipped into another recession, which could affect what the Bank of Japan is going to do about its low rate policy.

There are a lot of "ifs" related to this paragraph as anything can happen. For example the July-Sept. quarter was negative growth for Japan, and many were saying that Oct.- Dec. would see improved growth, but the opposite has actually happened as the Oct-Dec. quarter was negative growth too, which meant the Japanese economy has slipped back into a recession.

The Japanese yen, might become stronger, but at the same time, the Japanese economy might still be in a not so good place with it not growing.

And then there is the idea of the weak yen bringing in more foreign tourists and the weak yen, improve their purchasing power.

If the weak yen gets stronger, which is good for the domestic economy, the Bank of Japan has to decide what is best overall of the economy, a weak yen which helps exporters and foreign tourists or a strong yen which helps the domestic economy and importers. Maybe something in the middle that helps everyone.

Have a nice day and be safe!

Japan Household Spending: Updated Feb. 15, 2024

 

Japan's household spending in Oct. falls 2.5% due to hot weather

Article Source: https://mainichi.jp/english/articles/20231208/p2g/00m/0bu/026000c

Article:

TOKYO (Kyodo) -- Japan's household spending in October fell 2.5 percent from a year earlier, down for the eighth consecutive month, as the unusually warm weather drove up prices of some vegetables and prompted people to refrain from buying, government data showed Friday.

Households of two or more people spent an average of 301,974 yen ($2,097), the Ministry of Internal Affairs and Communications said. The rate of decline shrank slightly from a 2.8 percent drop in September.

Ideas:

Sometimes consumer buying is tied to the weather and sometimes the weather affects the growing seasons of fruit and vegetables. Most likely the drop in consumer spending might be related to a not so good growing season and an unusually hot summer, which delayed consumers buying winter clothes.

Of course the continued inflation challenge in Japan has forced Japanese consumers to reduce or limit their spending which might have been a factor too.

So a 2.8 percent drop in September and a 2.5 percent drop in October is a good sign that Japanese consumers are continuing to limit spending and or cutout spending on things they don't need.

Article:

The weak spending came as separate data showed inflation-adjusted real wages in October dropped 2.3 percent from the previous year for the 19th straight monthly fall, as wage growth failed to keep up with rising prices.

Nominal wages rose 1.5 percent to 279,172 yen for the 22nd consecutive month of growth, according to the Ministry of Health, Labor and Welfare.

The hotter-than-usual weather for the month led to lean harvests of tomatoes and green onions, driving up their prices, and prompted consumers to cut back on spending. The weather also slowed sales of other cold weather items, the internal affairs ministry said.

Ideas:

Real wages are adjusted for inflation and as inflation continues in Japan, wages might has less purchasing power if wages don't keep up with the rate of inflation.

Again, green onions and tomatoes were affected with a less than good growing season due to the hot weather.

And yes, because of the hot summer months, which was a record in Japan, decreases the buying of late fall and winter clothes.

But this is normal buying behavior in any country not just Japan, when the growing season drives up prices of fruits and vegetables and there was/is hotter than usual summer, which lasted into October.

Article:

By category, food expenditure, accounting for a third of household spending, fell 4.4 percent as people spent less on vegetables, seaweed and prepared food. Spending on preprepared lunch boxes such as sushi also declined.

Outlays on furniture and household products dropped 12.9 percent, led by durable items such as stoves and heaters amid the high temperatures. Spending on clothing and shoes also fell due to sluggish demand for winter fashion.

Ideas:

It appears spending on many things in Japan decreased as maybe Japanese consumers continue to cut back on things they don't need.

And again, the very hot summer in Japan, which lasted into October delayed to buying of stoves and heaters, which are important in Japan, as Japanese homes don't have proper heating compared to homes in other countries.

Spending on food might be a third of Japanese household spending but for the lower-income groups it might be even more as lower-income groups use more of their income on food than the higher-income groups.

Most likely, department stores, convenience stores, called conbinis in Japan, and specialized bento stores might be seeing large decreases in prepared lunch boxes called bentos in Japan.

Article:

"Prices are rising in general, but we think these spending patterns are largely attributable to the hot weather," an official at the ministry said.

In contrast, expenditure on transportation and communications grew 5.3 percent, as an easing chip shortage increased vehicle production and led to more purchases.

Household spending data is a key indicator of private consumption which accounts for more than half of the country's gross domestic product.

Ideas:

Agreed, for the most part, the super hot summer in Japan, which lasted longer than usual well into October might have affected the buying patterns of Japanese consumers as they delayed the buying of thing related to late fall and winter.

At one time, in 2021, or around that time, talking to a Japanese person on Skype, they said it is taking 6 months to get a new car order because of the semiconductor chip shortage related to new cars.

Household spending might account for half of Japanese GDP but, consumer spending is always a challenge as Japanese consumers don't spend like US consumers, and Japanese consumers/households are more savers than spenders.

And now add in inflation and maybe spending by Japanese consumers is less than needed or expected to increase economic growth.

Have a nice day and be safe!

Japan Household Spending: Updated Jan. 16, 2024.

 

Japan household spending down for 7th month in Sept. as wages slide

Article source: https://mainichi.jp/english/articles/20231107/p2g/00m/0bu/006000c

Article:

TOKYO (Kyodo) -- Japan's household spending in September fell 2.8 percent from a year earlier for the seventh consecutive monthly fall, as people cut back spending on food and other items amid rising prices while real wages continue to slide, government data showed Tuesday.

Households of two or more people spent an average of 282,969 yen ($1,890), the Ministry of Internal Affairs and Communications said. The rate of decline expanded from a 2.5 percent drop in August.

Ideas:

Most likely household spending will continue to decrease as long as inflation is a major factor for Japanese households.

Real wages are wages without inflation included meaning just like inflation and GDP real GDP is GDP without the inflation factor.

Food prices, in another article, have increased more than 7%. That is huge for the lower-income groups, which spend more of their income on food than the higher income groups.

Household spending or consumer spending, is the largest part of Japan's GPD at around 50% percent or more. But its much smaller that the consumer spending level in the US at 60% or more.

Article:

Separate data showed that real, inflation-adjusted wages in September dropped 2.4 percent from the previous year for the 18th straight monthly fall.

Nominal wages, the average total cash earnings per worker including base and overtime pay, rose 1.2 percent to 279,304 yen for the 21st consecutive month of climb, but they failed to keep up with rising prices, according to the Ministry of Health, Labor and Welfare.

Ideas:

Real inflation adjusted inflation, doesn't mean wages for workers were decreased. It means the value of the wages decreased as inflation increased again.

Even nominal wages, failed to keep up with inflation as inflation continues to be a major factor in consumer spending in the Japanese economy.

Inflation in the US has declined to around 2% after increasing to 6% in 2022. Inflation in they EU remains high for whatever reason, as some blame the Ukraine war and energy supply challenges in the EU.

But some articles have suggested consumer spending in the Japanese economy remains strong despite the continued inflation situation.

Article:

Food expenditure, accounting for over a third of household spending, decreased 3.7 percent, falling for the 12th straight month, led by falls in vegetables, seaweed and meat.

Outlays for housing also declined 11.2 percent due to cutbacks on repairs and maintenance work and rents. Other categories also saw declines, with spending on clothing and shoes plunging 18.3 percent.

Ideas:

Food prices have increased the most in Japan, and as result, maybe consumers/households are either cutting back and or trying to find substitutes at a lower price.

Vegetables, seaweed, and meat might have had some not so good growing seasons and the supplies might have been reduced, which also could have increased prices too.

And also housing expenses such repairs and maintenance fall by the wayside as Japanese households decreased spending on those items too.

Spending on clothes, especially winter type clothes might have been delated as the early fall season in Japan was extremely warm, which meant consumers might have delayed spending on late fall or early winter clothes.

Article:

Among the few bright spots, expenditure for transportation and communications grew 12.4 percent, due to an increase in vehicle purchases, the internal affairs ministry said.

Household spending data is a key indicator of private consumption, which accounts for more than half of the country's gross domestic product.

Ideas:

Most likely vehicle purchases were delayed during the pandemic and consumers are now buying again, and maybe too more smartphones are being bought again after a slowdown during the pandemic.

Households spending or consumer spending might be 50% or more of GDP in Japan, but that is low compared to the US at 60% or more. But, in fairness, Japan is more, or has been, for of a saving economy, compared the US, which is more of spending economy.

And at the same time. Japan's elderly population keeps increasing, and the elderly tend to spend less that the younger age groups.

Article:

As inflation pain continues for consumers in Japan, companies are under growing pressure to hike salaries from the government and Rengo, Japan's largest labor organization, ahead of the annual wage negotiations in spring.

The average pay hike at major member firms this year stood at 3.99 percent, the highest in 31 years, according to the Japan Business Federation.

Ideas:

The Japanese government can only suggest that companies increase wages but the Japanese government can give incentives as a way to entice companies to increase wages.

But the real challenges is with small and midsize companies who either can't because their profit margins have decreased due to inflation and energy costs and or they just don't want to do it at this time or in April of 2024 when most companies give wage increases.

Again, up o 70% percent of Japanese workers don't work for large companies which gave wages increases in 2023.while many small and medium sized companies didn't.

So it will be interesting to see what actually happens in April of 2024. Will only large companies increase wages again or will small and midsize companies also increase wages this time too.

Have a nice day and be safe!

Bank of Japan Expectations: Updated Jan. 4, 2024.

 

Long unwinding road awaits BOJ after slackening reins on yields

Article source: https://mainichi.jp/english/articles/20231101/p2g/00m/0bu/034000c

Article:

TOKYO (Kyodo) -- The Bank of Japan on Tuesday effectively removed its yield cap in response to an unexpected surge in U.S. Treasury yields and entrenched cost-push inflation, sending its strongest signal yet that it is preparing to unwind monetary stimulus to come more into line with its global peers.

BOJ Governor Kazuo Ueda said the latest policy tweak is unlikely to cause 10-year government bond yields to rise sharply above the previously-set ceiling of 1.0 percent, and it is intended to pre-empt forex volatility and other risks that may materialize.

The Japanese central bank decided to allow 10-year Japanese government bond yields to rise above 1.0 percent, while retaining its overall framework that keeps borrowing costs low under the so-called yield curve control program. Rising U.S. Treasury yields are adding upward pressure on long-term interest rates in Japan.

Ideas:

The Bank of Japan is trying to find ways to keep pace with the US Federal Reserve without actually changing it ultralow policy too much. 

Cost push inflation, which the variance between the US dollar and the Japanese yen has been continuing is a major challenge for the Bank of Japan.

At the time, as a way to not scare the markets, the Bank of Japan is beginning to signal that it "thinking" about changing its ultralow policy in maybe 2024.

Japanese government bonds might help but it can't completely prevent volatility in the currency exchange market.

Overtime, the Bank of Japan might not have a choice but begin to gradually change its ultralow rate policy. But the change might not even be that noticeable as  the Bank of Japan is not going to do anything too drastic and may make slight incremental changes in 2024.

Article:

While the BOJ has not budged in its more than a decade-long commitment to monetary easing, focus now shifts to how much long-term yields will be allowed to rise and when the central bank will do the more difficult job of ending negative rates when it believes stable inflation backed by wage growth is achieved.

The impact of the move to loosen its grip on yields may not be enough to strengthen the yen as desired by the BOJ, and pressure could mount on the central bank to do more, analysts say, given the pain higher import costs are causing.

What influence higher long-term yields will have on the broader Japanese economy remains uncertain, though they will increase debt servicing costs for Japan, which has a debt load that totals more than twice its gross domestic product.

Ideas:

The Bank of Japan is not going to change anything too drastic, as changing its ultralow policy too much might signal that it was wrong with the current policy and they don't want to show that.

With it changing the yield rates might be a sign that it is beginning to show some compromise but not completely changing the policy.

Just what does the Bank of Japan consider as "stable inflation" as inflation has continued to affect companies and households for the past few years.

The Bank of Japan has to decide how much does it want to see the Japanese yen strengthen and or how much does is want to Japanese yen to remain weak. It has to decide on a range that all in Japan; Japanese exporters, foreign tourists, and the overall domestic Japanese economy can live with.

What the Bank of Japan has always reasoned, is if it increased the key interest rate too much or too high. like in the US and the EU, it would cause too much stress on companies and households who needs loans from banks.

Article:

"Yield curve control won't last forever because long-term yields should be determined by market forces," said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute.

"What the BOJ is trying to do is to effectively scrap the cap and restore some normalcy to the bond market."

"The BOJ has been gradually paving the way for future steps, such as ending its commitment to guiding 10-year yields around zero percent. That would come while it carefully monitors yen moves and the prospect of wage growth," Kodama said.

Ideas:

Again, long-term yields have been used in place of increasing the key rate as the Bank of Japan, at the present time, is not ready to change its overall ultra-low policy.

The Bank of Japan, again, is using very small incremental steps to test the markets and see what the affects are at this time.

If the bond markets react and respond the correct way, then that might be a sign for further incremental step testing to see what happens in the Japanese economy.

Whether positive or negative the Bank of Japan seems to be waiting for Japanese companies to increase wages again in April 2024 as they might think wage increases will decrease the pressure on households related to inflation.

But the challenge, in the spring of 2023, only large companies, for the most part, increased wages, and 70 percent of Japanese wage earners don't work for large companies, which means of course 70 percent of Japanese wage earners might not have seen a wage increase April of 2023.

Article:

The yield curve control program was launched in 2016 under Ueda's predecessor Haruhiko Kuroda, setting short-term interest rates at minus 0.1 percent and guiding 10-year yields to around zero percent.

To address the negative effects of yield-depressing interventions in the bond market, the BOJ has made minor changes over the years. In July, the policy board decided to allow 10-year yields to rise toward the maximum limit of 1.0 percent but redefined the level as the "upper bound" at the meeting that ended on Tuesday.

"We wanted to modify and make it more flexible before long-term rates are pegged to their allowed limit," Ueda said at a press conference after the meeting. The benchmark 10-year yield rose to near 1.0 percent Tuesday ahead of the BOJ decision.

Ideas:

Again, the yield curve control program was setup so that maybe the Bank of Japan would not have to increase the key rate as maybe the yield curve would counter some of the negatives in the Japanese economy.

But overall, the Japanese yen continue to remain weak, and moved even weaker and inflation has continued on on Japan and inflation is expected to continue in 2024, but maybe not at the same strength.

Central banks need to be a flexible as possible as they have to navigate through multiple challenges at the same time and not try to interfere too much in an economy and upset normal market forces.

For example, the US economy is finally going to have a "soft landing" and there are no predictions of a recession in 2024.

Was it the result of the Federal reserves policies or action? Its hard to determine exactly if the actions of the US Federal Reserve had any effect on the inflation in the US. 

Would the US economy, if allowed to run its course naturally, would the same result be the same, a soft landing? Its hard to say.

So back to Japan and the Bank of Japan and its ultra-low policy actions, has it been the correct actions, or should have done what the US and the EU has done? Who knows exactly.

Article: 

Yoshimasa Maruyama, chief economist at SMBC Nikko Securities, said the BOJ sent a "clear message" that it will prevent long-term yields from surging because levels above 1.0 percent are not appropriate under the current macroeconomic conditions.

"We don't expect a further modification of yield curve control to ensure more flexibility before it starts to normalize policy in principle," Maruyama added.

A key factor to gauge the BOJ's confidence in achieving the kind of inflation it wants is the sustainability of wage growth.

Ideas:

Again, central banks, such as the Bank of Japan needs flexibility to deal with all of the challenges it faces, and keeping the long-term  yield as 1.0 or below is better for the Japanese economy in its current condition.

Just what is a normal monetary policy these days, as the Japanese economy, sometimes, doesn't react or respond to normal economic conditions.

The Bank of Japan keeps signaling it wants inflation around 2 percent which is at the low end of what most central banks want, which is inflation between 2 and 4 percent.

Maybe the Bank of Japan thinks the economy is still too weak and can't handle higher inflation rates.

US inflation, back in 2022 was as high as 9 percent and now its down to around 3 percent overall, while inflation in Japan has never increased past 4.2 percent overall.

And again, it seems maybe the Bank of Japan is depending too much or expecting too much from Japanese economies to increase wages and they think that might reduce the stress on Japanese households related to inflation.

And again, 70 percent of Japanese wage earners don't work for large companies, which were the main wage increasers in April of 2023.

Article:

Japan's inflation rate has remained elevated much longer than expected, due largely to higher energy and raw material import costs. Price rises have weighed on consumer sentiment as real wages have fallen.

Based on the latest projections, core consumer inflation will have remained above 2 percent for three straight years by fiscal 2024.

The BOJ will likely allow long-term yields to rise if they reflect economic fundamentals, rather than speculative moves. Sharp gains, however, could hurt the economy and increase debt-servicing costs for Japan, which has relied heavily on debt to meet its spending needs.

Ideas:

Again, Japan's inflation has been relatively mild compared to inflation that was in the US and the EU. but because Japan was in a stagnant mode or de-flation mode for maybe a decade, Japanese households have been struggling with inflation levels of 3 and 4 percent.

Real wages are wages adjusted for inflation, which basically means, because of inflation in Japan households purchasing power has been reduced and continues to be reduced because of inflation.

So the 3.5 percent wage hike given to large companies employees in April of 2023, might not have been enough to counteract inflation as maybe inflation was 4 to 4.2 percent at that time.

Then of course, 70 percent of wage earners might have gotten a wage increases, as most small and medium sized company wage earners might not have seen a wage increase.

Again, maybe the reasoning of the Bank of Japan is that increasing the long-term yield rates too much is like increasing the key rate too much and it could be a challenges for bank borrowers how need to borrow for whatever reason to survive.

Article:

"Financial markets may test the BOJ's tolerance. That being the case, 10-year yields rising to as high as 1.25 percent can be justified," said Takahide Kiuchi, executive economist at Nomura Research Institute, who is a former BOJ board member.

The government has already raised its assumed long-term interest rate used to calculate debt-related costs to 1.5 percent for fiscal 2024, up from a record low 1.1 percent in the current year to next March.

The widening of the interest rate gap between Japan and the United States has sent the yen sharply lower against the dollar. The euro also hit a 16-year high versus the yen after the BOJ's decision, which came after the European Central Bank held off on another rate hike last week.

Ideas:

Financial markets might test the BOJ's tolerance to see what the Bank of Japan will do;  will increase or decrease the yield.?

It remains to be seen just what actions the Bank of Japan will take, depending on what the financial markets respond to 1.25 percent increase.

It like a cat and mouse game between the Bank of Japan and the financial markets as to who is going do what and trying to anticipate each other's moves.

Also, the Bank of Japan, again and always, has to decide what range of the Japanese yen is best for the Japanese economy, as there are competing interests; some wanting a weak Japanese yen and some wanting a stronger Japanese yen.

The US Federal Reserve and the EU central bank, both recently, have held off on increasing its key rate, as in the US, for example, inflation has steadily declined and the economy it heading in the right direction.

Usually, but not always whatever the US Federal Reserve does, in increasing or decreasing the rate, central banks usually follow the same actions, except of course the Bank of Japan.

Article:

Yuji Saito, head of the foreign exchange department at Credit Agricole Corporate & Investment Bank in Tokyo, said 151.95 yen is seen as the next barrier for the dollar-yen pair.

"The BOJ would want to buy time until around January when it is expected to end its negative rate policy," Saito said, adding that a breach of the near-152 yen level will take it to 155 yen.

BOJ chief Ueda, an academic who served in the past as a BOJ board member, said the yen's weakness could mean people expect inflation to increase. If the yen continues to fall and pushes inflation significantly higher, this may warrant a policy change, he added.

Ideas:

It seems, but not sure exactly, as you don't think what the Bank of Japan is thinking, that every time, there is a barriers signaled for the the dollar-yen pair, it it it broken then eventually they signal another barrier.

It also seems to Bank of Japan, like most central banks, might always be buying time to see what the economy is going to do and or to test any incremental changes it puts into action.

The Japanese yen has been weak for some time and its been causing stress for companies and Japanese households for several years, without much intervention by the Japanese government or the Bank of Japan.

Article:

After Russia's war on Ukraine sent crude oil and other raw material prices higher, there are serious concerns the Israel-Hamas war could spill over into a wider Middle East conflict and drive commodity prices up further.

"We can't rule out higher crude oil prices and a weaker yen, which would add inflationary pressures," said Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute, adding that future unwinding of monetary easing is no easy task. "The BOJ would have no other choice but to be strategically vague."

Ideas:

The Middle East conflict has been going on, one form or another, for decades, but yes, this time its worse and the Ukraine situation, whether on purpose or not, maybe some producers have used the Ukraine war situation to increase prices.

Japan needs, if they don't have them now. trade agreements with oil/energy producing countries as a way to control energy and oil prices as Japan is a resource-poor country and is at the mercy of energy producers.

Yes, unwinding the current monetary policy might take some time and is not going to take place all at once but most likely in incremental steps as to not disrupt the Japanese market economy or cause too much harm to financial markets in Japan.

Yes being strategically vague might be the best choice at this time, as too much noise of too much information, too fast could cause disruptions in the Japanese economy.

Have a nice day and be safe!