Japan's Core Consumer Prices:

 https://mainichi.jp/english/articles/20210820/p2g/00m/0bu/029000c

Article:

TOKYO (Kyodo) -- Japan's core consumer prices dipped 0.2 percent from a year ago in July, as lower mobile data fees remained a big drag despite support from rising energy prices, government data showed Friday.

Nationwide core consumer prices, excluding volatile fresh food items, marked the 12th straight month of decline, according to the Ministry of Internal Affairs and Communications, posing a challenge for the Bank of Japan in its quest to hit its 2 percent inflation target.

The ministry changed the base year to 2020 from 2015 and the calculation method for the consumer price index. Under the new base year, the pace of decline in the core CPI slowed from 0.5 percent in June.

Ideas:

The Bank of Japan has been trying for a very long time to get inflation to 2 percent but hasn't been able to reach its target goal.

I don't see this as a failure of the Bank of Japan, I see it more as a structural challenge and or the Japanese economy is just not setup or structured like the US or even the EU economies.

For inflation to fully be able to change up or down, the economy needs to be in some kind of equilibrium, meaning, in this case, there is not full participation of all groups in the economy for consumer spending to reach its potential.

For example, women workers in Japan, most likely, are not working at their full potential, as some or many are working at low skilled jobs, underemployed jobs, or part-time jobs, and as such their salaries are not where they should be for their skill level. 

So as a result, a large part or group of the Japanese economy is unwilling or unable to spend up to their potential, thus might reduce consumer spending in the Japanese economy.

But at the same time, even if inflation was able to reach the 2 percent level, then the Bank of Japan has to begin to think about those on lower salaries and or those on fixed incomes if inflation begins to get too high for them.

So inflation can be both a positive and a negative in an economy. Inflation at the 2 percent level might show or indicate a good level of demand or economic activity in the economy.

And below that, say 1 percent might indicate the demand in the economy is not where it should be or not what it could be .

Article:

The data reinforces the view that Japan is unlikely to see inflation accelerating and the BOJ will need to maintain its ultraloose monetary policy for an extended period.

That contrasts with the United States which has been hit by inflation worries. The U.S. Federal Reserve is thought to be preparing to start stimulus tapering as early as later this year.

Mobile data usage fees, which are given more weight in calculating the CPI than before the latest revision, tumbled 39.6 percent in July from a year ago as major Japanese carriers now offer cheaper plans after facing mounting pressure from the government.

But higher energy prices and accommodation fees had a positive effect.

Ideas:

The ultraloose monetary policy can be both a positive and a negative. For banks and other it could be a negative if the Bank of Japan or the Japanese government doesn't provide subsidies or help if potentially banks are losing profits are lower interest rates.

At the same time, it can also be a negative, if the ultraloose policy encourages too many companies or families to continue to borrow extra money when means now potentially they are acquiring even more debt.

Extra or more debt can "crowd out" extra spending in the economy if businesses or families are worried about too much debt and or don't have enough extra money for using it in the economy.

If mobile fees were too high then then its a good thing that they are being lowered for consumers in the economy.

However, the companies will find ways to make up for the reduced data usage fees and charge consumers higher prices in other areas, either services and or other products.

Energy prices are very volatile as they are subject to global supply and demand. But an increase in energy prices should never be thought of as a solution to higher inflation.

There are always positives and negatives in anything that happens in an economy. Higher prices might be good for suppliers as maybe they now can get higher profits, but not so good for consumers of the energy as now they have to pay more. And if this means gas, oil, energy for some homes or cars etc., and if they are on lower incomes or fixed incomes it can be a real economic problem for them.

And maybe for some businesses, especially during the pandemic, if there profits margins are already too tight. An increase energy prices might be too much for some.

If accommodation fees means higher hotel fees, then most likely there might be more domestic travel now and hotels are upping their fees and demand increases. But they need to be very careful as consumers are still weary about the pandemic and maybe for some, if a  hotel has too high a price they will find another hotel and or not travel at all.

But if these hotels of course cater to the rich or upper class then they won't care too much about the hotel rates.

Article:

Rising crude oil prices led the kerosene price to jump 25.2 percent and gasoline to rise 19.6 percent, ministry data showed.

Accommodation fees gained 17.3 percent as hotel operators imposed higher prices with the number of customers increasing from a year ago due partly to a four-day holiday that coincided with the opening of the Tokyo Olympics.

The government's subsidy campaign to spur local tourism was launched in July last year, triggering sharp falls in accommodation fees. It has been suspended nationwide since last December amid a resurgence of COVID-19 infection cases.

Ideas:

Again energy sometimes are influenced a lot by supply and demand in the global market. And if they become too high in a country some groups or even businesses might be stretched because of the higher energy prices.

For example if gasoline prices, for consumer using cars, become too high they might then begin to think, if they can or could to consider using more public transport instead of driving their cars everyday.

The use of cars increased a lot in Japan increased a lot since the pandemic began as workers and others didn't want to be on crowded trains or subway systems.

But that can easily change if suppliers don't keep gas prices to an optimal or equilibrium level.

Yes its supply and demand but in some ways it might not be right that whenever there is a holiday period, some special event etc. hotels or other feel they need to increase prices if there is an increase in demand. 

There are already going to get more sales and customers so why the need to "price gouge" for lack of a better phrase or take advantage of consumers or customers.

The campaign last summer was probably a good attempt to encourage travel but it came at the wrong time and the pandemic was far from over as it is now.

But now at leas more people are vaccinated and its estimated up to 49% of the Japanese population have been vaccinated.

Article:

"The impact of mobile phone fees is large," said Junichi Makino, chief economist at SMBC Nikko Securities Inc. "Excluding special factors such as the lowering of mobile fees and the 'Go To Travel' campaign, however, the core CPI is up 0.5 percent."

"Although severe macroeconomic conditions continue, the CPI data does not change our view on the underlying price trend...and Japan is not headed toward deflation," Makino said.

Japan is still struggling to rein in coronavirus infections due to the spread of the highly contagious Delta variant. The Japanese economy eked out growth in the April-June quarter driven by strong exports and capital spending, though private consumption remained weak.

Ideas:

The decrease in mobile fees, despite helping everyday families and consumers, the lower fees might mean more extra income which means potentially consumers might use the savings from the lower mobile fees now in the economy which in turn increases overall demand in the economy.

If they core CPI did increase by as much as 0.5 percent, then that's a good thing. But the real challenge is if it can be continued into the future.

Japan might not be headed to deflation or lower prices but that doesn't mean consumer demand is where it should be. Consumer demand in the Japanese economy is way below where it should be and most likely won't be anywhere near its potential until the pandemic is over.

As mentioned in other articles, while exports increases are good and very much needed, they are unable to carry the Japanese economy as its estimated that exports might only account for 20 percent of Japan's GDP while consumer spending is estimated to be 50 percent of GDP.

Any increase in capital spending is good as it shows or could show businesses might be feeling good about the future or at least for their business or industry.

Article:

Concerns have grown that surging raw material costs could squeeze profits at Japanese companies as economists say many are reluctant to pass on those higher costs to consumers.

"We will have to closely watch how energy prices move," a ministry official said.

So-called core-core consumer prices, excluding fresh food and energy items, dropped 0.6 percent for the fourth straight month of decline. 

Ideas:

Yes, companies that see their suppliers increase their prices might be concerned about "passing on" the increased supply costs to the next in line because of consumer demand is not where it should be, whether that is supplies to other companies or whether that is to the final retail customer in the supply chain.

As such profit margins might be less than wanted or needed for a company to grow or even stay in business.

Eventually overtime companies may have no choice but pass on some or all of the costs to the next group in the supply chain.

Core-core consumer prices might have dropped 0.6 percent but the real question, for those that matter, did they see a decrease in prices.

Again an economic activity can be both a positive and a negative. 

For consumers of course they might see it as a positive but for the suppliers they might see it as a negative as most likely their sales and profits didn't increase.

Have a nice day and be safe!

Japan Exports:

 https://mainichi.jp/english/articles/20210818/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan's exports grew 37.0 percent from a year earlier in July, keeping up their sharp rebound from the initial blow of the coronavirus pandemic amid a solid global economic recovery, government data showed Wednesday.

Rising for the fifth month in a row, exports totaled 7.36 trillion yen ($67 billion), lifted by robust shipments of cars and auto parts to the United States as well as semiconductors and chipmaking equipment to Asian nations including China, the Finance Ministry said in a preliminary report.

Ideas:

Export growth is always good and most likely will continue but not at the same pace, as maybe some of the exports are demand that was delayed due to the pandemic.

The global economic recovery will most likely continue except for a situation that seems to be growing related the semi conductor chip market.

But at the same time, even though many countries are increasing their vaccination rates, the virus variants seem to be growing which potentially could cause challenges for supply chains and shipping.

Article:

The year-on-year increase topped 30 percent for the fourth straight month, following a 48.6 percent expansion in June, partly in reaction to a 19.2 percent drop in July last year when the pandemic dampened global demand for Japan-made products such as cars.

July's exports topped the pre-pandemic level two years ago, up 10.7 percent from 6.64 trillion yen in July 2019.

Imports soared 28.5 percent to 6.92 trillion yen, up for the sixth consecutive month, on rising prices for crude oil imports from the United Arab Emirates and other countries along with brisk purchase of iron ore mainly from Australia.

Ideas:

Yes, because the drop in the spring and summer of 2020 was large, it makes it look like the increase in 2021 as something significant. But in reality most likely its just a normal delayed demand from a year earlier.

So there was the delayed demand and the normal demand for July 2021 and that would obviously top the pre-pandemic level. Again just normal activity plus delayed activity.

The idea that imports increased needs to be taken with a grain of salt, meaning it might not be what it seems. For example are the imports based in import prices or are they based on import volume. 

As it looks, the increase in imports is based on changes in import prices and oil prices are very volatile meaning the go up and down easily on the global oil markets and or depending on supply and demand in the oil market.

So if the OPEC oil suppliers had reduced their supplies it might cause prices in the global market to increase as as such Japanese importers have no choice but to pay higher prices for the oil they need.

And then the iron ore prices could be in a similar situation and or dependent on supply costs and or shipping costs due to the pandemic.

But for the iron ore it could nothing more than an increase in demand from Japanese companies that need to ore to make different products and as such more ore was imported in July than the previous months.

Article:

The goods trade surplus stood at 441.02 billion yen, ensuring black ink for the second successive month and turning positive from the previous year's 14.76 billion yen deficit.

All figures were compiled on a customs-cleared basis.

The strong recovery in exports has helped the Japanese economy emerge from its record annualized contraction of a real 28.2 percent in the April-June period last year from the previous quarter triggered by the pandemic.

In the April-June period this year, the economy grew an annualized real 1.3 percent from the previous quarter for the first growth in two quarters, the Cabinet Office said Monday.

Ideas:

Its always good when the there is a merchandise good trade surplus as that means more money going into the Japanese current account that is going out due to imports.

Of course it also means global demand for Japanese merchandise exports are strong, which is good for Japanese manufacturers.

It also needs to be remembered, what while exports are important for the Japanese economy, they are not the entire economy. Exports only make up about 20 percent of Japan's GPD, while consumer spending makes up about 50 percent of Japan's GPD.

So while 20 percent might not be that much it is a large amount, but at the same time, exports alone can't grow the economy or carry the economy while consumer spending is not where it should be.

The Japanese economy needs all parts functioning at their potential. That means exports, consumer spending, business spending/investment and so on.

Have a nice day and be safe!

Japan's Economic Recovery:

 https://mainichi.jp/english/articles/20210817/p2g/00m/0bu/015000c

Article:

TOKYO (Kyodo) -- Japan's economic recovery is likely to remain sluggish in the July-September period, as the resurgence in domestic coronavirus infections is expected to lead to parts of the country remaining under a state of emergency for the next few months, analysts say.

Some analysts say the economy is unlikely to return to its pre-pandemic size by the end of 2021 as projected by the government, following the release Monday of figures showing real gross domestic product increased at an annualized pace of just 1.3 percent in the April-June period.

Responding to a survey released Thursday by the Japan Center for Economic Research and conducted over an eight-day period through Aug. 6, 36 private-sector think tanks forecast average GDP growth of an annualized 2.55 percent in the July-September period, down sharply from the 4.90 percent increase projected a month earlier.

Ideas:

Most likely Japan's economic recovery is not going to change much or improve that much for the time being. There is still too much uncertainty around the pandemic situation in Japan.

Its highly unlikely that the Japanese economy can reach the pre-pandemic level anytime soon. When you have a large part of the services sector still under-performing, when you have the current semiconductor chip shortage continuing and getting worse, and when you have both the domestic and international tourism sectors almost non-existent, except for maybe travel to Okinawa, its doesn't look like the Japanese economy is anywhere near the pre-pandemic level.

Maybe even a 2.55 percent is a little too much right now. Of course many times the surveys can appear to be somewhat optimistic at best. Probably something just below 2.0 percent is a little more realistic considering the semiconductor chip situation.

Article:

The downgrade reflects the state of emergency issued in Tokyo in mid-July, which was then expanded to four more prefectures earlier this month, asking eateries to stop serving alcohol and close early and for people to refrain from unnecessary outings.

Fully covering the period of the Tokyo Olympics, held with almost no spectators from July 23 through Aug. 8, the emergency, the fourth so far issued, is currently scheduled to end on Aug. 31.

But the number of daily new virus cases nationwide has kept increasing, topping 20,000 on Friday to log a record high for the third straight day.

Ideas:

Perhaps by now most if not all people are tired of the waiting and the long drawn out measures. Of course the measures are meant to help society and keep the numbers down. But sometimes people don't see that.

An economy is very complex and there are always positive and negatives in any situation or any action that is taken. While the emergency measures have been for the good of society overall, they are not so good for the restaurants and other places that have to close early and not serve alcohol.

Of course there have been reports of up to 40 percent of such places in the Tokyo entertainment areas not following the emergency rules (suggestions) as they say they can't survive as most likely most of their business is at night.

Trying to get people to refrain from unnecessary outings is like the classic example of a man's finger in a dike which is about to flood, meaning a man using his finger to stop the flood is impossible. 

Yes, some people or many people here or there might refrain from doing things, but people now have too much pandemic fatigue, and maybe some are finding ways to cope or manage living within the pandemic situation.

Of course as more and more people become vaccinated, maybe some people have begun to take too many chances and not remain vigilant as the cases are still too high.

Article:

"The emergency will be probably extended to around October," said Keiji Kanda, a senior economist at the Daiwa Institute of Research. "That means, most of the July-September period will be under the state of emergency, and economic growth in the quarter will be very slow."

Kanda said that it has been "getting harder" to flatten the curve of infections by repeated emergency declarations as people have become less willing to comply with them.

Such a situation could remain in place until the end of October, when about 80 percent of Japan's population is expected to be fully inoculated, he added.

Ideas:

Even if there were no emergency measures economic growth probably would not be back to the pre-pandemic level. An economy does not change course or bounce back immediately overnight. There are too many moving parts of an economy that take time to get up to full speed.

Some might parts, such as exports, might and have bounced back, but now even exports are most likely not going to reach a level that was seen in the spring because of the semiconductor chip shortage.

And as the pandemic drags on most likely more and more people are less willing to comply with the emergency measures.

And not just people, as businesses maybe are becoming less willing and they need to survive and stay in business.

It wouldn't be a surprise, that the  40 percent that was reported to be not complying in the Tokyo area, more and more businesses are not following the emergency measures as they have to survive, and the number of businesses rise well above the 40 percent that was reported earlier.

Even as more and more people get vaccinated and Japan does reach the 80 percent mark, will the number of virus cases decrease? That seems to be the challenge for the Japanese government to figure out, knowing full well people want to get back to some kind of normalcy in their lives.

Article:

During the second and third emergencies earlier this year, there was a sharp fall in people visiting retail stores and entertainment facilities from the period before the measures were introduced in the target prefectures and some other areas.

But under the current emergency, the flow was only slightly down in Tokyo and roughly flat nationwide in July, according to Daiwa's analysis.

Daiwa predicts the fourth emergency and a less strict quasi-state of emergency covering 13 prefectures will reduce Japan's GDP by 520 billion yen ($4.7 billion) from July 12 through Aug. 31, smaller than the losses incurred under the second and third emergencies, respectively.

Ideas:

Yes, the flow might be slightly down as people are tired of waiting and just want to be out and about. Maybe its time for the Japanese government and globally, to try and figure out how to "live with the continuous threat" of a virus situation with of course taking all the needed measures to protect society.

And yes the Japanese economy might not be where it should be but at the same time, its not dead too. An economy is very complex and its a living organism, meaning there are many parts to it. As such there are some parts that might be doing quite well, but because of the pandemic there are still many parts not doing so well.

So the flow of people to stores and such might be flat, but that doesn't mean negative. There most likely still a good flow of people/customers into stores and such but of course not what it should be.

Article:

"The adverse economic impact is expected to be smaller as the virus emergency has become less effective. Still, consumer spending will remain at quite a low level as long as the emergency continues," Kanda said, adding that the only realistic option for the government to contain the virus spread now is to promote its vaccine rollout.

Although Japan still lags behind other developed economies in inoculations, its rate of fully vaccinated people has been sharply increasing recently, reaching 36.70 percent as of Thursday, compared to the world's average 23.26 percent, according to the University of Oxford's Our World in Data project.

Citing expectation that progress in the vaccination campaign will boost private consumption, the Cabinet Office released an estimate in early July that Japan's GDP will return in 2021 to its "pre-pandemic level" -- defined as its size in October-December 2019 -- also supported by brisk exports and business investment.

Ideas:

Consumer spending has always been a major challenge for the Japanese economy, and has been part of the Bank of Japan's focus on increasing the inflation rate to 2.0 percent with not much success.

And while the pandemic situation continues, most likely consumer spending is not going to be where is should be or reach its potential. But consumer spending even before the pandemic was never at its full potential.

Part of the problem is structural meaning there are parts of society or economy that are not operating at their full potential.

For example part of the Bank of Japan's strategy and the negative interest rate, related to businesses has been to "use your money or lose your money" over the long term by providing workers more pay raises as a way to get workers/consumers to feel good about the extra income or "disposable income" they have a use it spend it in the economy to increase inflation.

Another area where there are structural challenges are the working women in the Japanese economy Most likely are are not working at their skill level and most likely many or some are working in lower level jobs and or are underemployed.

If this group was able to work at their skill level, and were able to be paid at their skill level, it might actually improve consumer spending in the Japanese economy and most likely consumer spending in the Japanese economy might get near to its full potential, and maybe get closer to the 2.0 percent inflation level that the Bank of Japan has been trying to reach for about seven years.

Article:

The annualized size of real GDP for the April-June 2021 was 538.67 trillion yen, while that for October-December 2019 was 547.00 trillion yen.

A government official said that the official view will be maintained even after the release of the April-June GDP data and analysts' relatively pessimistic projection for the following quarter.

"Consumption will be encouraged once vaccinations prevail and allow us to ease restrictions on economic activities, so the economic recovery to the pre-pandemic level by the end of this year is still achievable," the official said.

But Taro Saito, executive research fellow at the NLI Research Institute, said the recovery is highly likely to be delayed until next year since he projects GDP will grow by just some 1 percent in annualized terms in the current quarter, downgraded from his previous forecast of around 5 percent following the latest emergency.

Ideas:

Its too soon the project any kind of real recovery in GDP growth as unfortunately, despite the number of vaccinated is growing, the virus cases have not decreased enough for the Japanese government to feel safe or good about the situation.

Consumption or consumer spending, most likely will not be anywhere near where it should be for the time being. While there might be some who are tired of waiting and they will be out and about spending, there is most likely a large number who are still very concerned about their income and jobs and many sectors in the Japanese economy are still under stress because of the pandemic and as such are not going to spend much yet, and they are waiting to feel better about their situations.

A GPD growth of about 1 percent sounds about right because of the semi conductor chip shortage has now began to affect Japanese car makers and any company or industry in Japan that uses chips in any electronic situation.

Article:

"As is the case with April-June, the trend of increases in capital expenditure and exports offsetting a virus emergency-induced consumption decline will remain unchanged," Saito said.

Meanwhile, he pointed out that GDP components other than consumer spending have turned less susceptible to the virus measures. Among them, capital spending will continue to grow "throughout fiscal 2021 and 2022" which ends in March 2023, he predicts.

"On the back of manufacturers' strong performances, more firms will invest on industrial machinery as well as on digitalization". 

Ideas:

While its good that exports and capital spending has increased, it must be pointed out that exports and business spending alone can't carry the Japanese economy and can't fully expand GPD growth.

Consumer spending in the Japanese economy is estimated to be around 50 percent of GDP. If consumer spending is down because of the pandemic and for other reasons GPD growth is not going to get much past the 1.0 percent level in 2021.

Yes it good that some measures are now less affected by the pandemic situation, it remains to be seen how much they can help the overall growth of the Japanese economy.

Consumer spending in the past, now, and in the future is the main component in the Japanese economy and GPD growth that is going to be the biggest challenge.

Have a nice day and be safe!

JAPAN Q2:

 https://mainichi.jp/english/articles/20210816/p2g/00m/0bu/012000c

Article:

TOKYO (Kyodo) -- Japan's economy in the April-June period grew a real 0.3 percent from the previous quarter, or an annualized 1.3 percent, as robust exports were overshadowed by sluggish consumption under a state of emergency over the coronavirus pandemic, government data showed Monday.

It was the country's first increase in real gross domestic product, the total value of goods and services produced in the country adjusted for inflation, in two quarters, according to the preliminary data released by the Cabinet Office.

Although the growth figure was better than the average projection of 0.7 percent annualized growth by private-sector economists, the GDP rise was too slow to make up for the January-March quarter's 3.7 percent contraction.

Ideas:

The Japanese economy has a long way to go before there will be any real sustained growth. Growth that will be consistent from quarter to quarter and not just one somewhat good quarter or economic growth and then another quarter of negative growth.

But unfortunately even before the pandemic it seemed like that was the pattern of growth of the Japanese economy.

For whatever reason, the Japanese economy has not been able to really maintain any real quarter to quarter growth for very long.

The Japanese economy seems to take one or two steps forward and then the next quarter one or two steps back. 

So no wonder the Bank of Japan can't seem to figure out how to get inflation to the two percent level when the economy doesn't grow consistently from quarter to quarter.

Article:

With Japan lagging behind other major economies in its vaccine rollout, the latest data highlighted the lack of momentum in the country's economic recovery after its worst slump on record last year caused by the pandemic.

In the same three-month period, the U.S economy grew an annualized 6.5 percent and the euro area logged an 8.3 percent expansion.

"It is vital for us to support businesses and employment while giving the highest priority to curbing the spread of virus infections," economic revitalization minister Yasutoshi Nishimura told a press conference after the GDP data release.

Ideas:

Yes, the vaccine rollout has not been where it should be, but at the same time, even as more and more people become vaccinated, the virus variants seem to be spreading. 

But even with that the more people vaccinated should help in the economic recovery, but it remains to be seen just how much it can help if the virus variants keep growing.

And with the US and its supposed 6.5 percent annualized growth, the latest jobs reports in the US was less than expected. Many are blaming the growth of the new virus variants which might be affecting supply chains and domestic demand.

Even some large related chains such as Walmart are now beginning to put limit restrictions on purchases as a way to limit shortages on some products as was the case in the Spring of 2020.

And the latest news is/was there are over 8 million people who lost their jobs during the pandemic who have not found a new job and are about to lose their unemployment benefits.

So even a 6.5 percent growth has its problems and challenges as that doesn't mean all businesses are growing or doing good.

Yes, maybe more should be done to help any Japanese business that is still having problems during the pandemic.

Even when most people get vaccinated it seems the pandemic is far from over which has the potential to limit consumer spending, maybe limit capital spending, and many other areas of economic growth.

Article:

Amid a resurgence of virus infections, the government declared a third virus emergency in late April for Tokyo and three western Japan prefectures, and later expanded it to 10 out of the country's 47 prefectures. It was lifted in late June, except for the southern island prefecture of Okinawa.

Consumer spending rose 0.8 percent from the previous quarter, the first increase in two quarters. In the January-March period, spending fell 1.0 percent as parts of the country were under the second virus emergency.

Exports rose 2.9 percent, up for the fourth consecutive quarter.

The third virus emergency weighed heavily on private consumption, with eateries serving alcohol asked to suspend their operations and dining establishments not serving liquor to close early. People were requested to stay home.

Ideas:

Its seems apparent at this point, while good intentions, the Japanese emergency measures are not exactly working.

But to be fair, even as more people become vaccinated, which of course is meant to deter or reduce the virus situation, its not working, as it seems Tokyo and the Kanto area seems to hit now with even more infections.

And as the news media presents the number of cases each day over and over, the public will continue to refrain from going out and about and as such the consumer spending, while up some, might continue to not be where it should be.

The growth of exports is always a good thing, but the Japanese economy can't rely on exports only for its growth. The Japanese economy is now just too big to rely on exports to the US, the EU, or China to sustain any real growth in the economy overall.

Article:

Affected by a global semiconductor shortage, car-related exports were not in full swing, but demand for chip-making equipment and other industrial machinery was solid on the back of strong recovery of the global economy, a government official told reporters.

Meanwhile, imports grew 5.1 percent, partly due to the government's procurement of COVID-19 vaccines.

Business investment, another key pillar of domestic demand, grew 1.7 percent, and private residential investment rose 2.1 percent, both contributing to the reporting quarter's GDP growth.

Ideas:

The challenge, again, is these areas in the Japanese economy that are showing signs of growth have to keep increasing or keep growing. But except for exports, many areas of the economy don't show sustained growth from quarter to quarter.

And the biggest challenge, as its always been, even before the pandemic is consumer spending from quarter to quarter. 

Its not so much that there isn't growth in consumer spending its that consumer spending, for many reasons, never reaches its potential.

For example maybe because of the ageing population, which tends to spend less that those below the age of 65.

It could be the number of people who only have part-time jobs, or temporary jobs, or contract only jobs and as such the don't have a lot of extra or disposable income to spend on things other than their daily needs.

And then those who do have regular jobs, maybe they haven't received much of a raise in years, and they don't feel good about their income enough to spend extra in the economy.

And then the working women in the Japanese economy who are underemployed and not working in jobs up to their skill level, and as such don't feel good about their salaries and as such are not spending a lot in the economy.

And then you add in the pandemic factors and it makes it even worse for consumer spending to reach its potential in the Japanese economy.

Article:

"Postponed capital expenditure that many firms had initially planned in fiscal 2020 (through March) apparently began emerging this fiscal year," the official said, adding that digitalization and decarbonization-related investments are on the upward trend.

Government spending increased 0.5 percent, partly underpinned by purchase of vaccines, while public investment fell 1.5 percent as costs to build infrastructure declined.

Takayuki Miyajima, a senior economist at Sony Financial Holdings Inc., said consumption was better than analysts' forecast "partly because many people are believed to have gone out more frequently and spent more, especially in June when the emergency was lifted" in most of Japan. But he added that the level of personal consumption is still low.

Ideas:

If we look at what is called Keynesian economics, supposedly whenever the private sector is not where it should be then the government will step in to help the economy, wherever needed. 

So despite some increases in some areas of the private sector maybe the Japanese government should continue to help the economy as it doesn't look like the pandemic is going to end anytime soon.

But at the same time, some might say, the Japanese economy is now beginning to show enough signs of growth, that the Japanese government doesn't need to prop up the economy any more.

That might be true in some areas, but there might be many areas of the Japanese economy that is not doing very good.

Yes, consumer spending is picking up here or there, but not enough to really help the economy grow. Real consumer spending growth might not come until all of vaccinated and then that is no guarantee as the virus variants just keep coming, which might continue to limit consumer spending.

Article:

Since mid-July, Tokyo has been under a fourth state of emergency with recent record-breaking spikes in the number of daily new infections as the highly contagious Delta virus variant takes hold.

In addition to Okinawa and Tokyo, Osaka and three prefectures near the capital have been added to virus emergency, clouding the outlook for the world's third-largest economy achieving high growth in the current July-September quarter.

Miyajima said his firm had expected the economy to grow an annualized 2.8 percent in the July-September period and 5.6 percent in the following quarter, but the projection for the current quarter will be slightly downgraded following the latest GDP data and situation of the virus spread.

Ideas:

Even if the Japanese economy reaches an annualized 2.8 percent, again that doesn't mean every company and every industry in the Japanese economy grew 2.8 percent.

An economy is very complex with many different kinds of industries and companies, and even before the pandemic, in a market economy, not sector or industries grow the same. 

That is the nature of any economy, and as such some will grow or increase a lot and some will not.

And not you add in the pandemic and lot more variables affecting the economy overall.

Whenever, whomever, gives some kind of estimate, for the most part, they are just guesses, as no one can predict 100 percent what is going to happen in the future. 

Even before the pandemic it seems many different groups would always give different estimates for what might happen as they are just trying to take a guess as to what the economic growth will be.

Even with all of the big data analysis and all of the latest modeling software no prediction or guess is 100 percent. As you are dealing with people, and people are not always consistent as to what they will do in the future.

Article:

"Anyway, there is great uncertainty," he said, indicating that the estimated figures are subject to change depending on infection situations.

In nominal terms, or unadjusted for price changes, the economy grew 0.1 percent, or an annualized 0.2 percent, in the reporting quarter.

Revised GDP data is scheduled to be released on Sept. 8.

Ideas:

Exactly! Even the person admits the supposed estimates are just guesses as there is just too much uncertainty about the future.

So even if the Japanese economy grew 0.1 percent or an annualized 0.2 percent, did every citizen in Japan feel the growth? 

Maybe yes and maybe no, as again an economy is so complex, you might have some businesses see increases in sales and profits but then might see some businesses with losses and no profits, which is the norm in any economy.

So should anyone get excited about a 0.2 growth? Of course not because its not local, and might not show what or how it affected them.

Did keep their job, did they get a raise, did the company they work for do good or did the company they work for not do so good?

So that is the real economy. How companies do and how it affects people, not so much about about 0.2 growth. 

But any growth hopefully is a good sign.

Have a nice day and be safe!

Japan Wholesale Prices:

 https://mainichi.jp/english/articles/20210812/p2g/00m/0bu/016000c

Article:

TOKYO (Kyodo) -- Wholesale prices in Japan jumped 5.6 percent in July from a year earlier, the fastest pace of increase in nearly 13 years, amid rising energy and commodity prices as economic activity picks up, Bank of Japan data showed Thursday.

The prices of goods traded between companies rose for the fifth straight month and steep year-on-year gains have been seen in recent months -- 5.0 percent in June and 5.1 percent in May. The latest figure represents the steepest rise since September 2008, according to the central bank.

Ideas:

Rising wholesales prices might not mean a rise on prices for consumers and some companies and wholesalers have said they are hesitant to "pass on" the increase in costs to those next in the supply chain and or regular consumers because demand in the Japanese economy is still not where it should be.

Rising energy prices are always a volatile situation, as some energy commodities are subject to fluctuations in global supply.

The prices of good trade between companies are probably easier to "pass on" than to end of user regular retail consumers, as again as demand is not where it should be at the moment, and whomever, knows they might be stuck with the increase in costs for the time being.

Article:

A weaker yen also led to higher raw material costs for companies, the data showed. Import prices surged 27.9 percent while those of exports gained 11.2 percent, both in yen terms.

Wholesale prices normally have a delayed effect on consumer prices. The BOJ is struggling to hit its 2 percent inflation target, measured in consumer prices, even as its U.S. and European peers are carefully monitoring rapid inflation.

Ideas:

Importers prefer a strong yen, which means they have to pay less for the imports from the EU or the US for example.

While exporters prefer a weak yen, as they can get more for their exports to the US or EU for example.

Wholesale prices might have a delayed effect as not all wholesalers will or can "pass on" the increased cost the next level especially if they know there is low consumer demand in the economy for their products.

The reason Japan is not reaching is inflation goal and or the reason for less consumer demand in Japan could be related, at the present, to the delayed virus vaccination process.

And or because the Bank of Japan since around 2014 has been trying to increase inflation to the 2 percent rate, the Japan economy, in its present structure, is unable to reach 2 percent. 

Most likely, even if there was not a pandemic, inflation would probably only reach 1 percent, if even that.

Japan, for example related to its structure, as has just been reported or mentioned in other reports, has a major challenge with working women who are working in jobs that are not at the level of their skills, and as such they are underemployed.

Unleash this group, give them jobs that match their career aspirations or their jobs skills and Japan just might reach that 2 percent inflation level.

But when you have a large part of society that is underemployed its can only have a negative affect on consumer demand as they are not making the salaries that they are trained for, and as such are not going to spend to their potential like they might do if they had higher salaries.

Abe, I think, tried to address this issue when he was Prime Minister.

Article:

The latest survey showed that petroleum and coal product prices soared 38.8 percent from a year earlier, tracking higher crude oil prices. The pace of rise slowed from a 42.0 percent gain in June.

Prices for wood and lumber products surged 33.1 percent on supply shortages due to growing demand for house building and other uses.

Ideas:

Higher or lower prices sometimes can attributed to basic supply and demand issues.

For example such as the wood and lumber prices and there being a supply shortage, a supply shortage usually puts pressure on prices to rise, as producers now have less to offer but still want the same about of sales or profits from the shortage supply and they would with a regular supply.

So with wood and lumber there can always be both a shortage and increase in demand at the same time. If the demand becomes unusually high it can have an affect on suppliers who are unable to keep up with a sudden increase in demand. 

And for oil and petroleum the prices are very much always related to global supplies so if the OPEC nations have reduced output or supplies on the world market that can cause a surge in prices globally.

Supply chains challenges could still be a factor during the pandemic as most likely transporting by oil tankers might not be operating at full capacity which could result in some shortages.

Article

Nonferrous metal prices gained 32.3 percent while those for scrap and waste jumped 81.2 percent. Prices of textile products, which often indicate the strength of domestic demand, were up 0.5 percent.

"The global economic recovery continues in line with progress in vaccinations (against COVID-19) and wholesale prices are facing upward pressure," a BOJ official said. "But coronavirus cases have been resurging at home and abroad, and uncertainty is rather increasing."

Ideas:

As manufacturing sectors continue to improve the demand for more metals will increase which will force prices up. And or a shortage of the metals at the same time will force prices up.

While textile prices might be increasing, it does really mean consumer or even all producer/suppliers will feel the affect of the increase in prices. 

Even the textile sector is complex so even companies in the textile sector might be "passing on" the higher prices to the next customers in the supply chain.

Yes, wholesale prices might be facing some upward pressure but at the same time, the wholesalers might be reluctant to "pass on" their higher costs at the moment because the pandemic is still very much a problem in Japan.

The global economy may indeed be in a recovery phase but it has a long way to go due the the continued increase in new variants, the semiconductor shortage, and the vulnerability in global supply chains.

Have a nice day and be safe!