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Inflation - good news for the Japanese economy?

Inflation is a matter of many headaches over the world, but with Japanese ... this is strange, because this country has to "fight" with deflation during the last decade .

These days, if we ask any thing any Japanese consumers, almost certainly you will hear at least one complaint about the state of food and energy price hikes.

Japanese consumers currently pay 1.7 USD / liter, while witnesses soya sauce and bread prices have risen by 10-30% since the beginning of the year. This can cause you a simple inference that the Japanese people will cut spending.

However, many economists see this as a good thing for the economy of Japan, because the country to curb deflation shouldered the majority of consumers predict prices will fall. The result is that they enhance cash reserves and postpone plans to buy cars or washing machine to wait for further price reduction.


Now, when prices suddenly rise, the more likely the consumer will have the opposite reaction, due to price increases anxiety.

CEO of investment advisory firm Tantallon Research JapanEconomist Jesper Koll, said: "Inflation is a dream come true of Japan".

Inflation is really good news?

Glad before inflation is not something normal, especially when wage growth in Japan is still quite slow. However, this is true in the short term, the country had to "fight" for too long with deflation. Yet the fact that there are not many Japanese consumers go shopping rush to see prices.

May 5/2008, total spending by Japanese households fell by 3.3% compared to the same period last year, according to government statistics. "My shopping habits did not change much. Yes, I have recently bought cereal, curry powder and soy sauce than before, but also limited in what can be stored as a not very large so I can not have enough storage space, "housewife Mari Yamaguchi, 30, who lives in Tokyo, said.

Many suggested that Japanese consumers have no reason to worry about inflation will spread. The fact that in May 5/2008, the consumer price index (CPI) rose 1.5% in Japan - the highest level in more than a decade ago, but it was due to a number of tax changes . Wholesale price index also rose 5.6% in June - the highest level in the past 27 years, after rising 4.8% in May, according to data published on the Bank's 10/7 Japanese restaurant.But he Masaaki Kanno, chief economist at JPMorgan in Tokyo, said that if removing food and energy prices, the Japanese CPI rose 0.1% remains. He also predicts an increase in food and energy prices will not spread to other commodities.

However, the reality is appearing some signs that the situation increased the prices of goods coming out in Japan. Recently, many companies have high fixed cost burden for fear of losing customers to competitors hands, but this can not be sustained.

Last month, the Japanese media reported that Toyota Motor simultaneously considering the price increase all types of vehicles for domestic consumption in the future. LastToyota price increase from 1974. Toyota is the largest automobile manufacturer in Japan, so if they do so, the other producers were regarded as "open road".

On 24/6, CEO of Nissan, Mr Carlos Ghosn , also said they are considering increasing car prices in Japan, and encourage other manufacturers should have similar measures to deal with the cost of materials Rising input.

Money is no longer idle

Mr. Koll's investment advisory firm Tantallon Research Japan and some other economists said that nearly half of the total reserves of about 14 trillion of Japanese households are stored in the form of cash mainly savings in bank interest rates low, usually below 1% / year. Interest rates, "a humble" This is not the time to pay attention to deflation, because the value of people's savings in fact still rising. But when the economy falls on inflation, they might think differently.

Inflation may lead consumers to think about withdrawing their savings to move to some other forms of investment more profitable.

View from now

Investors are hoping that inflation could increase their profits at the Japanese company. In a recent announcement sends customers, Virgil Adams, a senior analyst of the company Matthews International Capital Management, has predicted inflation in Japan will stimulate the process of "evolution" of business Japan. The company can not afford to compete with the rising costs would have to take measures to merge with other companies to exploit economies of scale.

According to Adams, the irrationality exists in some industries, such as pharmaceuticals, with 1,200 different manufacturers, while the third largest pharmaceutical manufacturers in Japan is still only half the size of the group Johnson & Johnson. Now Japan's largest retail scale with only 10% of America's largest companies.

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