Japan Inflation: Updated October 27, 2024.

Japan inflation slows to 2.4% in Sept. as energy bill subsidy resumes

Article Source: Article: Article was deleted by mistake.

Ideas:

Inflation in Japan has been steady and its just not one month but it seems like every month, so all those months can add up for Japanese consumers and businesses.

Inflation is in itself is not a bad thing, but when it becomes excessive it can be a stress for many consumers and businesses. 

There is good inflation, the increase of prices due to increased demand and there is not so good inflation, price increases by companies that are just passing on their increased costs to the next in the supply chain, including the final customer.

Japan is resource-poor country which means Japan has to import much of what is needs, which of course means its subject to global prices increases on most products including gas and oil.

And then add in the weak yen, and imports are inflated even more for not just Japanese consumers but Japanese businesses too.

Energy and fresh food are taken out of most consumer price indexes, globally, as the two items can be very volatile, meaning prices can go up and down a lot.

Subsidies are good and needed but are they enough to cover the Japanese household energy costs in the summer and then as winter approaches, most likely global warming or global changes are going to cause record low temperatures this winter.

As there were probably a lot of new air-conditioners sold this past summer in Japan and the same situation might happen in the winter with an increase in sales in heaters this winter.

Japan, if they don't, have need trade agreements with energy producing countries to try and control the price of energy, and Japan has to import much of what it needs.

There has been a lot of discussion if there really was/is a rice shortage in Japan, as even the Japanese government has suggested there never was a rice shortage. But at the same time, there might have been a reduction in the harvest of rice and the weather might have limited the rice production, which of course, related to supply and demand, anytime there is a shortage, prices will increase.

Anytime there as reduced harvest, of any kind of fruit and vegetables, farmers and so on will increase prices as they need to make up for the limited supply with higher prices.

And of course due to production costs, now even rice farmers are passing on their costs to the next in the supply chain, which of course will affect the Japanese consumer.

The summers in Japan have gotten hot each year, which means the price of fruit and vegetables will most likely be higher.

The price of durable good might have nothing to with anything other than the increase of prices related to manufacturing of the durable products, as manufacturers, again, are passing on their increase costs to the next in the supply chain.

Hotel expenses might be related to either an increase in demand and or an increase in energy bills due to the summer heat.

The Bank of Japan is watching very carefully the increase or decrease in prices and whether they should increase the key interest rate this fall.

If prices continue to increase the BOJ might decide to increase the key rate, if prices remain steady and not increase that much the BOJ might delay the interest rate increase.

But another key ingredient is what is going to happen in the stock markets this fall, and of course what is going to happen in the US elections. If the global stock markers go crazy the BOJ might wait until things cool down.

Prices alone most likely is not going to get the Bank of Japan to increase the key rate as what is happening in the global markets, again, might have an affect on what the BOJ does.

For example, the stock market upheaval, this past summer, might have forced the Bank of Japan to  step back from a rate increase this fall.

Again, as the US election is coming up, and the chance the global markets are going to be somewhat crazy the BOJ might wait until December or even January to make its move.

Have a nice day!

Bank of Japan Meeting: Updated April 24, 2024

 

BOJ members more positive about policy normalization at Jan. meeting

Article Source:  https://mainichi.jp/english/articles/20240131/p2g/00m/0bu/029000c

Ideas:

Just what does normalizing its monetary policy mean exactly, other than maybe adjusting the policy as needed to meet the needs of the Japanese economic, with key interest rate increases or decreases, depending on the current state of the economy.

There are always going to be situations, both major and minor, that might cause some twerks in the monetary policy, such as the earthquake that hit central Japan recently,

Wage growth or wage increases might be the key to the Japanese economy moving out of its stagnation situation and moving out of its so-called deflation situation too.

Wage growth might allow Japanese households to be able to get past the household energy situation and they might feel good enough to begin to spend more and more consumer demand will be part of the Japanese economy again, 

But, as mentioned before, all companies, large, midsize, and small need to participate in wage increases for all in the economy to feel good about what is happening, and if not, then, again, there will an unbalance economy of haves and have nots.

The ultra-loose policy might change but don't expect major wholesale changes and the Bank of Japan is going to move very slowly, to make sure what they do doesn't cause any harm in the Japanese economy.

For example the key interest rate, while at zero or a negative rate, might go to a positive rate of 1, which is still way below the US rate of 5.3 points, but don't expect much more than this for awhile.

At the same time because the US rate and the Japanese rate are still too far apart the Japanese yen, will most likely remain weak, for the time, being, which will be good for foreign tourists who travel to Japan.

The 2 percent price stability target was/is always a goal, that hasn't been met in ten years, but the Bank of Japan keeps trying. The inflation target of 2 percent was always focused on consumer demand and consumer spending and not inflation related to companies passing-on their energy and materials costs to the next in the supply chain.

But most likely there is always going to be cost-push inflation and companies will always be passing-on their costs to the next in the supply chain including the final customer.

The key is to improve consumer demand and consumer spending in the Japanese economy, to where consumer spending it the key driver of economic growth.

There are both positives and negatives to the rates, as they are, but maybe the positive side of the rates, has run its course, and now the Japanese economy needs to see some higher rate to get the economy moving again, including more inflation, which in itself is not a bad thing.

Increased inflation, up to a point, is a good indicator or good economic activity, just like less inflation, such as at 1 percent or below it a good indicator of not so good economic activity, as maybe an economy is depressed or not operating at its normal level.

A 2 percent inflation rate, based on consumer demand and consumer spending, for the Japanese economy, is very good, and sometimes consumer demand and consumer spending is not where it should be.

Its important that all Japanese companies participate in increase wages for all in the Japanese economy, as some 70 percent of wage earners in Japan don't work for large Japanese companies, but work for small and midsize companies.

And while wage increases are important, for wage earners to feel good about their wages and, then maybe they will begin to spend more in the Japanese economy, which will increase consumer demand and consumer spending and then, companies might be able to naturally increase prices.

For the past few years,  maybe consumer demand and consumer spending has not been where it should have been in the Japanese economy along with Japanese companies passing-on their costs even though consumer demand and consumer spending was not where it should have been, as it made an un-natural situation of increased costs and not so good consumer demand in the Japanese economy.

Have a nice day and be safe!