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High raw material costs plus weak yen threaten Japan's recovery from COVID

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By Noriyuki Suzuki

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High raw material costs plus weak yen threaten Japan's recovery from COVID

Blame on material costs, blame on Covid, never blame government and politician that create poor policies over years. Even before covid, Japan is in constant decline.

https://info.ceicdata.com/what-is-causing-japans-steady-economic-decline

27 ( +37 / -10 )

To help ease the failing economy, Japan could always embrace allowing international tourism back into the country instead of their current state of Sakoku....

Enough is enough. The majority of countries have finally realised that shutting their borders is futile and only does more harm than good.

The current variations of Covid which are going around aren't anywhere near as deadly as at the beginning (and even then we weren't talking bubonic plague levels) and the countries which have reopened haven't seen massive spikes in hospitalisations or deaths. It's time that we live with Covid like we do with the various other strains of flu and illnesses which are out there. Because global economies (especially Japan's) can't continue like this.

13 ( +21 / -8 )

Wanna help Japan? Let the tourists in! I have a bunch of yen that I would love to spend in Japan. I will contribute.

Economic recovery for Japan requires that the borders be opened freely to tourism. I have no grand numbers to put forward, but I am sure that it would help greatly.

I have a place to stay near Kyoto, and I am wondering just how many of the establishments that i usually visit will be gone when I return.

That, and find some way to get Russia to behave. Nothing like being on the precipice of a global war to destabilize economic recovery from a pandemic...

11 ( +17 / -6 )

In a crisis, an LDP guiding principle is: How can we get taxpayer money into the hands of companies without having to go through the working public?

To soften the blow to consumers from surging energy costs, the government has been giving oil wholesalers subsidies to bring down retail prices.

That is one way. But retail prices are rising.

Despite emerging evidence of companies passing on higher energy, commodity and grain prices to consumers, many are still finding it difficult to raise prices, according to the Bank of Japan's Tankan survey released Friday.

The woes of Japan Inc. were brought upon itself by decades of not passing along the fruits of the labors of Japanese workers.

But of course they will never have accountability. Instead in a pinch they are getting more money from the public.

10 ( +16 / -6 )

With these costs going up, it was hardly time to devalue the yen and play the abe/kishida-Nomics card, printing money only makes costs higher and we all know companies do not increase wages for low paid workers-he’s making life more difficult for those who need the most help..

10 ( +11 / -1 )

LDP uslesss until the end

10 ( +14 / -4 )

There are several key metrics due for release this week. Average cash earnings (wage growth) will be watched for stagnation. Household spending, will be interesting as well. Preliminary release of leading economic indicators in Japan is due Wednesday. And the consumer confidence survey is due out on Thursday, as well as current account. Busy week ahead.

Consumer perception cannot be overrated enough at this point. Government stimulus, subsidies, and incentives are all well and good, but if people stop buying, business will suffer. New hiring won't happen, wage growth declines, and government will be called to do more stimulus. And more, perhaps, for at least a few fiscal quarters. Quite a self-fulfilling cycle.

And, naturally, many eyes will be on the US for more inverted yield curves. And the FOMC meeting and fed speeches on Tuesday.

Stay tuned.

9 ( +10 / -1 )

Ironic as Abe actually wanted inflation! As soon as it starts happening there are reports of everything falling apart.

9 ( +11 / -2 )

They're not hiding anything anymore:

One of the key pillars would be to incentivize companies withholding price increases for fear of losing sales to pass on costs to consumers and extend financing support for struggling small and midsized firms.

They're straight-out saying that they want to make the working people suffer by enduring higher prices while their taxes go to support businesses.

For years these snakes have been trying to hoodwink the public into thinking that inflation and the devaluation of their spending power would somehow help them. Now the inflation they've been beating the drum for has arrived and the working people are not being fooled anymore. Japan had a great thing going during the 2000s and up to 2012: steady consumer prices, strong currency; a generation of workers who didn't have the employment opportunities that their elders enjoyed could at least save money, buy their first homes, and raise children. Now the government wants to make them suffer and make their futures insecure. And the government will get away with it, because the people here just don't protest when they get stomped on again and again.

9 ( +14 / -5 )

Too many People still think Japan is a democracy. Japan is not a democracy!

The country is run by bureaucrats, blame all this decline to Ministry of Finance, "Zaimucho".

7 ( +18 / -11 )

higher wages isn’t the answer if there’s no productivity increase.

https://www.epi.org/productivity-pay-gap/

It has been the other way around and that is the problem.

6 ( +9 / -3 )

higher wages isn’t the answer if there’s no productivity increase. 

Typical neo-classical malarky. When workers in the developed countries see their productivity rise, they most often see their real wages barely budge or stagnate. Think of those burned out - but low-paid - workers at Amazon warehouses. Rich company, impoverished workers.

The yawning gap is between corporate profits and real wages. The corporates and wealthy are taking a larger and large share of national income and leaving less for regular folks (whose spending accounts for around 60% of Japan's GDP). That is what is suppressing growth.

blame government and politician 

Why? They aren't the ones deciding most of our wages. Those decisions are made in corporate boardrooms. Why is everyone so reluctant to blame corporations?

6 ( +10 / -4 )

One of the key pillars would be to incentivize companies withholding price increases for fear of losing sales to pass on costs to consumers and extend financing support for struggling small and midsized firms. To soften the blow to consumers from surging energy costs, the government has been giving oil wholesalers subsidies to bring down retail prices.

How about the pampered LDP daimyos cut taxes ( or increase tax free threshold ) for the public or dish out another subtantial cheque - say 10 man yen for everyone earning below certain salary so they have more money to spend. Instead of the perptual transfers of our taxes to their corporate buddies. Oh yeah, and cut the politician salaries to show "sympathy with the people " ( as the DP govt did after 3/11 ). How about it Kishida san ? Election is on the way.

6 ( +8 / -2 )

So tired of the single minded weak yen policy.

"It's not just exporters that are leading the Japanese economy. The service sector accounts for 70 percent of gross domestic product," Sakurada said at a recent press conference. "The service sector is not necessarily structured in a way that welcomes a weak yen."

This policy is outdated only serves to make Kuroda look like he has inched closer to accomplishing his target of 2% inflation based not on actual growth but a simple numbers game. One which relies on a weak currency, government spending, increased taxes, and low wages. Not domestic demand.

Between 2005 and 2019, manufacturing output in Japan per worker grew by 25%, while wages grew at about 1%. In contrast, Korea, which allows its currency to rise in value saw output rise by 57% and wages climbed by 52%. Like Japan, Korea has an elderly population, but domestic demand is high. To be fair, Korea has problems, too.

However, a weak yen is not sustainable. It is hurting demand, export growth doesn’t trickle down to medium/small domestic companies and their workers.

It is time to let the yen rise in value, let consumers drive domestic growth by giving them higher wages to spend, and let export companies start to compete without government support.

6 ( +7 / -1 )

Robert Mang:

A weak Yen is not all bad news. It's good for exports, and Japan exports a lot. It's also an incentive for foreigners to come and spend... that is if they were allowed to enter the country!

Maybe when Kuroda was a spring chicken a weak yen really helped export companies, but most of those companies have moved their manufacturing overseas (Mazda, Panasonic, Bridgestone, to name a few), so that they can reduce their exposure to forex risks. In fact, Japanese blue chip companies see less benefits from a weak yen than they used to see. According to the nikkei, 2022 profits will rise by 0.43%, however, in 2009, they rose by 0.98%. Clearly, a weak yen policy has diminishing returns for Japanese export companies. Kuroda and the rest of Japan’s dinosaurs need to stop trying to relive the glory days and come up with something new. The Showa bubble ain’t coming back.

6 ( +6 / -0 )

A weak Yen is not all bad news. It's good for exports, and Japan exports a lot. It's also an incentive for foreigners to come and spend... that is if they were allowed to enter the country!

4 ( +8 / -4 )

@Teslainvestor

It's easy for you to say coming from your place of privilege isn't it?

Protesting actually changes many things .. for example demanding higher salaries and better working conditions etc.

There is nothing wrong with protesting against an unfair system that favours the super rich.

You are part of the problem if you can't see this !!

4 ( +9 / -5 )

The last 30 years has been like boiling a frog from cold water; everything has come on so slowly, so incrementally that the creature remains oblivious. Certainly, it has never become the global evening news headline. Compare that with Brexit. By contrast, I'd argue the problems facing Japan in the 2020s and 2030s make Brexit look like a picnic. Nothing would jolt Japan into the headlines unless accompanied by an earthquake (and even then, the disaster would the scapegoat to explain the economic woe, not Japan's government or lack of dynanism)

3 ( +6 / -3 )

“Monetary easing” started in jakan after the bubble burst and hasn’t changed the Japanese economy in almost 40 years. All it did is increase Japans public debt. It’s a house of cards…..

2 ( +4 / -2 )

That kind of victim mentality gets you nowhere in life. .

If that hardworking ethic were true mother's in central Africa should be billionaires.

It is all about early access to capital as anyone can see.

'Pulling yourself up by your bootstraps" is as contradictory as the metaphor.

But some evangelists keep on popping up for various reasons.

2 ( +4 / -2 )

If you work hard but you're not smart, then it probably won't work out for you. But for smart people, they just have to put in a little bit of effort and they end up the top 1%.

Looking at the statements of many in the 1% , like Donald Trump, I would never put them in the top percent of intellect.

Stephen Hawking never earned what Donald Trump, Abe Shinzo or Maezawa Yusaku did.

2 ( +6 / -4 )

Won’t be eating out much anymore.

1 ( +3 / -2 )

I don't understand this panic, they wanted cheaper yen, isn't it BOJ? Wait...

1 ( +3 / -2 )

Maybe they should encourage more domestic activity and allow other countries to send their money and people here. Just a thought.

1 ( +2 / -1 )

Countries around the world have really weakened their economies by all the COVID regulations and vaccine requirements for international travel.

If Japan and other countries dropped the COVID regulations and vaccine requirements for foreigners traveling to Japan, it create large influxes of money into their economies. Tourists do not take anything out of the economies they travel to, all they do is spend money and put into the local economies.

1 ( +1 / -0 )

Of course it’s not done with a microscopic lump sum handout and a few tourists who also became poorer by their countries’ pandemic. You surely guess what I recommend. A new bubble economy is needed, with helicoptering the tons of printed money not into a very few big pockets but all over the country. Maybe that’s the only and last option, as the last decades show, when there wasn’t even a pandemic or bigger war most of the years, but deflation and depression too.

0 ( +3 / -3 )

Japan's business mind have to be reprogram very quickly.

This particular poster has been advocating for total lockdowns as long as I can remember.

A lot of JT posters like this will be quite surprised to see the logical outcome of shutting down the world's biggest economies over the flu.

And its only going to get worse.

0 ( +2 / -2 )

Full marks for choosing a photo of a bakery for an article about "high costs" :)

Not that it would matter if my wife were paid more than 1200 yen an hour.

0 ( +1 / -1 )

Japan is a country over regulated and protected.

Where is the free trade?

The choice of imports; food and clothes(exempt Chinese low quality imports) is always low and the prices high!

The consumer is condemned to the endless regurgitation of ‘mayo chips’ and ‘ramen flavored bread’- not real food at all!

The made in Japan label is now ‘made in China’ with a Japanese corporate name.

The aging population and lack of reform ie placing of government offices to regions outside Tokyo ensures a steady but sure decline.

0 ( +2 / -2 )

said Ryutaro Kono

Amen, Kono-san.

0 ( +0 / -0 )

Why is everyone so reluctant to blame corporations?

The way it works (in normal economies) is competition for labour forces employers to offer higher pay in order to secure workers with the skills they need.

Corporations aren’t responsible for creating the competitive environment that leads to that.

So the OP was correct that the government ought be blamed.

Corporations are just groups of individual people, like each of us.

None of us go to the supermarket and tell the supermarket to accept our extra money because we want to pay above the displayed price, do we?

0 ( +1 / -1 )

Leading with a weaker currency is never a viable long-term solution.

leading in high value products and services is how you build your economy. This is why Trump is a moron when he wants to devalue the USD. We’re not competing with cloth manufacturers in Indonesia. Our economy is a high tech, high skilled economy.

-1 ( +18 / -19 )

Our economy is a… high skilled economy.

Over half of workers in the US are low-wage, low-skilled workers. 32% of total workers cannot afford health insurance.

Japan is still ranked No. 1 in skilled labor force. Korea is No.2, followed by Germany, China, UK and then the US.

-1 ( +6 / -7 )

since I came to Japan I have never heard that Japan is doing well.every year debt bigger and bigger,stimulus for LDP friends from our taxes higher and higher.

covid,DPRK,dry summer,wet summer you name it...any reason to "excuses" country weak leadesrhip...so here we are guys.

-1 ( +8 / -9 )

A weak Yen is not all bad news. It's good for exports, and Japan exports a lot. It's also an incentive for foreigners to come and spend...

Why not state the truth? When was the last time you saw a tour bus full of Americans or Europeans? You mean, "it's a incentive for Chinese people to come here and spend."

-1 ( +2 / -3 )

No!

it is not legal to sell out of date food in the UK as it is in Japan

-1 ( +0 / -1 )

Japan's business mind have to be reprogram very quickly.

-2 ( +2 / -4 )

bureaucrats, blame all this decline to Ministry of Finance, "Zaimucho".

For when life gives you lemons.

https://koikeya.co.jp/karamucho/

-2 ( +0 / -2 )

The Australian dollar has gain 7% on the Japanese Yen since late January. Underestimate sells from iron ore and coal by 200 Billion and some gain in tourism have strengthened the Australian dollar. It has also strengthened against the American dollar by 5% since late January. The Yen has lost about 3% to the American dollar in the same time. The effect of the war so far has been of little effect yet only at the bowser. This down trend is mostly from the long term effect of border closure. Once open fully that 3% will quickly be gain back. Shipping is the biggest problem and more so for EU where they have no long term LPG Cargo fleet or docking infrastructure. Give give the shortage of oil only for 12 months with Likely hood of Iran come into the energy market.

-2 ( +0 / -2 )

Sounds like a place selling old, out of date food.

-2 ( +0 / -2 )

eat rice ball!

-3 ( +5 / -8 )

Anyone is reading this? Is this the key policy by government?

One of the key pillars would be to incentivize companies withholding price increases for fear of losing sales to pass on costs to consumers and extend financing support for struggling small and midsized firms.

Pass on costs to consumers? And support those companies? And who will support consumers when prices will increase 20-50%?

-3 ( +2 / -5 )

This is what you get when you allow leaders' dreams to devalue the currency. Kuroda said "It won't affect things much here", while he and other gloated about how it will push exports -- an economy Abe wanted to return to at the expense of everything else. Now, we're reaping the results of what they've sown.

-4 ( +6 / -10 )

Maybe everyone could just work an extra hour every day?

-4 ( +4 / -8 )

II think that, for pandemic recovery, Japan needs to embrace tourism.

You want to experience safe, clean and friendly? Come to here!

I'm shocked at how cheap it is to book a hotel. As much as I like it personally,

customers should be paying more.

I agree with what you say about increasing tourism, but in my opinion rising the price is not the best way to encourage tourism. Japan has already been overpriced for some years.

-4 ( +2 / -6 )

Japan compared with the UK!

Went shopping a bought the following in a supermarket with wide choice and low prices.

Today in the UK: a loaf of bread 80 yen,a tub of coleslaw 80 yen, 2 lamb chops 200 yen, 500 mls of juice ( not 3% muck) 80 yen.

Japan is overpriced and the minimum wage is well down on the UK.

-4 ( +1 / -5 )

jefflee

these productivity increases are not due to worker effort but due to investments that companies made - mainly computers and IT. It doesn’t take a lot of effort or intelligence to do basic data entry on excel.

now if you’re able to write VBA code to automate some excel features, you might warrant a little pay bump, as the worker took it upon himself to improve his skill set.

-6 ( +4 / -10 )

It appears that the pandemic emergency around the world is fizzled out and become endemic.

To Jumpstart the economy and get back into the swing of things - perhaps it would be a good idea for Japan to issue another stimulus payment to everyone and fully open up the country to tourism.

A tax break and small loan to help businesses back on their feet.

Japan could bounce back .

Japan's involvement in sanctions against Russia are proving to be a self imposed stumbling block of epic proportions.

-8 ( +5 / -13 )

Teslainvestor-

The USA built its strong economy by taking advantage of other countries and using immigrants and illeagal aliens and drugs and weapons.

The USA isn't as high tech and highly skilled as the arrogant country thinks it is.

And the article has no mention of Trump !

The USA economy may not appear to be suffering compared to Japan but however the USA has a whole different set of problems to deal with than Japan.

And Russia is going to retaliate at some point .

-8 ( +5 / -13 )

I'm going to say it over and over again.

The situation won't get any better it will only get worst.

Get rid of your YEN, and diversify.

-9 ( +3 / -12 )

Trading with our neighbours Russia, China and SK may possibly be an answer while the Western world is collapsing. Also India.

COVID-19 is worldwide, so you can’t blame it.

-9 ( +1 / -10 )

I think that, for pandemic recovery, Japan needs to embrace tourism.

You want to experience safe, clean and friendly? Come to here!

I'm shocked at how cheap it is to book a hotel. As much as I like it personally,

customers should be paying more.

-11 ( +11 / -22 )

This is why you don't follow along with the west to sanction countries when you don't have the strength to back it up. Nations like Iran, Russia and Venezuela are places that provide energy to the world at a cheap price. We should have stayed neutral in all of this just like other countries. The US doesn't dare to say anything to India too when they bought oil from Russia for cheap.

We could always restart our nuclear facilities. That is still a option. Europe planned to build more anyway.

-11 ( +7 / -18 )

Dagon

higher wages isn’t the answer if there’s no productivity increase. That only leads to more inflation (the bad kind).

-11 ( +7 / -18 )

Dan

What privilege? My parents were making $30K in NYC. I had no private tutors, no cram schools. I almost failed high school because I cut too many classes. The last book I read outside of study manuals was curious George. Teachers thought I had no future. There were drug dealers and gangbangers across the block where I grew up.

But you see, no matter how bad I had it, I never complained about how bad my situation was. The US finds a way to find talented people like me and fast track us into positions of wealth and power. All you have to do is be born with a high IQ.

There are good reasons to protest and bad reasons to protest. Protesting for higher wages isn’t good. It just causes inflation. Do you want a higher wage? Then go work for it by studying and acquiring valuable skill sets.

-11 ( +4 / -15 )

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