Inflation Makes Mess in Japan, Batters Yen. BOJ’s Kuroda Clings by His Last Fingernail to “Transitory”

But he’ll be out in April.

By Wolf Richter for WOLF STREET.

Bank of Japan governor Haruhiko Kuroda, the architect of Japan’s crazed money-printing binge under the economic religion of Abenomics, which started in 2012, will depart the BOJ when his term ends in April 2023. He won’t do a U-Turn on his interest-rate policy because it has been his baby for 10 years, no matter what happens to inflation, and it’ll be up to the next person to deal with this mess. And a mess it’s starting to be.

Japan’s “core” Consumer Price Index for all items less fresh food – which the BOJ uses for its inflation targeting – jumped by 0.6% in October from September, according to data from Japan’s Statistics Bureau today. This amounts to 7.4% annualized. The 0.6% jump was the worst month-to-month jump since the consumption tax hike in April 2014; and beyond that, since May 2008; and beyond that, since the consumption tax hike in April 1997.

On a year-over-year basis, the “core” CPI jumped to 3.6%, the worst since 1982, even outdistancing all the consumption-tax-hikes. The purple line indicates the BOJ’s inflation target. As inflation shot right through that target in April, the BOJ has been unwavering in keeping its short-term policy rate at -0.1% and its 10-year yield peg at 0.25%, which is just crazy.

Kuroda, upon seeing the spike in core CPI, said today that it was rising “quite a bit,” and clinging to the “transitory” theory with his last fingernail, he said that it would drop below 2% in the next fiscal year, which starts in April, as the impact of prices of fuel and raw materials fades. But as we’ll see in a moment, inflation has already transcended fuel and raw materials and has spread deep into the economy.

The CPI for all items jumped by 0.6% month-to-month, and by 3.7% year-over-year, matching the consumption-tax spike in May 2014, and beyond that, it was the worst increase since 1990:

The end of the era of true price stability.

Inflation is particularly insidious in Japan were something like true price stability has reigned for 23 years, where bouts of inflation were followed by some mild drawn-out deflation, to where prices overall remained roughly level for 23 years. People, society, and the economy are not at all prepared to deal with inflation.

Over this period, the Consumer Price Index for all items – as an index value to reflect price levels, not year-over-year change – had been relatively flat. After the consumption tax hike in 1997, the index settled at about 99. Over the next 13 years, the index then declined by a total of 5%, then rose again, reaching 100 in 2018, and roughly remained there until late 2021, when inflation took off.

Some of the major categories of inflation.

  • Food: +6.2% year-over-year: fresh food +8.1%; fish and seafood (crucial in Japanese cuisine) +13.9%; fresh vegetables +6.7%.
  • Energy: gasoline, electricity, piped gas to the home, propane, kerosene: +15.2%.
  • Household goods, such as furnishings, appliances, utensils, bedding: +6.9%.
  • Repaid and maintenance: +6.9%
  • Communication: +5.6%
  • Clothing and footwear: +2.5%
  • Rent: 0% (that’s nice)

Governments hold down inflation with categories they control.

  • Healthcare inflation: In this system of universal healthcare, the government largely decides what consumers have to pay:
    • Medical care: +0.2%
    • Medicines: +1.3%
    • Medical supplies and appliances: +0.1%
    • Medical services: -0.3%
  • Public transportation: +0.3%
  • Education: +0.7%
  • Water & Sewage charges: -3.4%.

BOJ buys yen to prop it up, after it got battered by BOJ’s let-her-rip inflation policy.

In mid-September, as the yen was in free-fall against the USD, the BOJ started periodic operations of selling dollars and buying yen to support the currency that way, instead of hiking its policy rates to get a grip on inflation, which would cure the yen’s problem.

A plunging yen makes imports of all kinds more expensive, not just raw materials, food products, and energy, but also consumer products and components for manufacturers.

While the plunging yen helped translate foreign-currency revenues by Japanese companies from sales overseas into higher yen figures, it had no actual impact on revenues from products that Japanese companies make overseas and sell overseas, such as automakers that all have plants in the US, Mexico, China, and Europe. And much of what they sell in these markets is made in these markets, not in Japan. A weaker yen doesn’t actually help these manufacturers, but it allows them to translate their sales in dollars, euros, renminbi, and pesos into more collapsed yen, which looks better in yen.

But they’re groaning under rising costs for products they sell in Japan.

In January 2021, it took about ¥104 to buy $1. By last month, it took over 150 yen to buy $1. Today, it was 140 yen to the USD. The large drops over the past two months are likely the result of BOJ interventions:

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  78 comments for “Inflation Makes Mess in Japan, Batters Yen. BOJ’s Kuroda Clings by His Last Fingernail to “Transitory”

  1. RP says:

    Hard times for Japanese people. A lot of elderly people there unable to lift their incomes. Very tough.

    • Leo says:

      Japan survived ZIRP so long because
      1. it was one of few countries that ran a trade surplus and
      2. Yen was thought to be a global hedge to dollar.
      3. Japanese central bank started buying stocks, etfs and bonds to bailout investors.

      As the trade surplus became trade deficits and Yen started collapsing, Japanese central bank was forced to go all in and play its last card: its now selling US treasuries and other assets to try to stabilize Yen.

      It knows that raising rates will crush its precious (the asset bubbles), so it says inflation is transitory.

      • Flea says:

        That last paragraph describes America

        • RH says:

          Amen. Watch a yt presenter called moconomy, whose vampire squid caricature must be seen to be appreciated. It focuses on the UK but applies equally to the corruption in the US. The families of ultra rich have long used inflation as a reverse tax to effectively reduce their liabilities and the wages and pathetic, Pension-social security payments, and puny savings accounts of the poorer American, British, and EU citizens.

          Like CCP cadres and Putin’s crony oligarchs, they are all parasitic kleptocrats sucking our financial “blood.”

      • MiTurn says:

        Good points. And combined with their national debt and demographic trends (with a strong bias against immigration), they’ve painted themselves into an impossible corner. I think that it is probably fair to state that they are in an unprecedented economic situation.

        No one seems to know the solution.

        • NJGeezer says:

          Paul Krugman “knows” the solution. He’s been advising them for many years. “Keep printing”
          Long Live J.M. Keynes!

        • Augustus Frost says:

          Debt default is fare better than destroying a culture through mass immigration Culturally, Japan is in much better shape than the US or Europe, both of which are modern Tower of Babel.

        • NBay says:

          Nah. Its because their god(s) are more easy going than ours, who gets pissed pretty easy.
          Think that one was just about breaking his building codes.

  2. Gen Z says:

    If Japan is suffering high inflation despite a stagnant housing market, then why are real estate bulls betting that the Bank of Canada and Federal Reserve will pivot over one tenth of a percentage decrease in inflation?

    Every time mortgage rates go down by one tenth of a basis point, the bulls tell us that the FED will pivot.

    America and Canada are suffering from high inflation that Japan is also suffering with the same level as reported by America and Canada.

    • Depth Charge says:

      All speculators and financial media talking heads have been yammering on about a pivot since the first rate hike. It’s because their whole financial world is collapsing, and their continued solvency depends upon it. Jerome Powell is slowly cutting them off at the knees with a dull butter knife, and they are letting the world know it loud and clear.

      • phleep says:

        And the faith in rising house and stock prices is a lynchpin to keep tens of millions of workers/parents embedded in a steady social treadmill. And, to get the youth of today onboard for this, as a life plan and basic set of values. I.e., this is the basis of USA social order generally. hence, I think, the engineering we have seen by the Fed: they don’t have a Plan B. Wall Street has positioned itself deep in the whole architecture.

  3. MattF says:

    Does selling dollars mean selling dollars or selling treasuries? In my conception of how economies work, selling dollars means that there were dollars held by BOJ that were not in the economy chasing goods, but now those dollars are chasing goods – inflationary to the dollar. But selling treasuries means that there are now more treasuries being chased by the same amount of dollars, essentially competing with treasuries being sold by the government or by the fed via QT. This would make the price of treasuries drop and help the Fed’s inflation fight. If BOJ is selling treasuries, is that deflationary to the dollar?

    I’m trying to think of this from the perspective of supply and demand for dollars. Is that correct from a monetary perspective? Selling dollars increases the supply of dollars lowering the dollar’s value. Selling treasuries increases the supply of a product bought by dollars, raising the dollar’s value. Am I thinking of this correctly?

    • Hans Brink says:

      In respect to what is happening in the rest of the world they will be fine,

    • Old school says:

      I think you can say that a treasury is still a dollar, but has an interest payment or interest bet attached to it.

      In some ways maybe the Japanese markets make more sense than US markets in that Japanese stocks have a higher dividend payout than Japanese treasuries. More risk, you should get higher payout.

    • Jason says:

      I believe that exporters are paid in dollars, which they buy US treasuries with. Now they sell those treasuries, get the dollars back and sell the dollars for yen. Maybe they buy their own jgbs with those yen, who knows.

    • Wolf Richter says:

      Two step process: Selling dollar-denominated securities (such as Treasuries) in the bond market to get the dollars, and then selling the dollars for yen in the currency market.

      • MattF says:

        Thank you for clarifying. Putting this comment and your response to Links together, raises more questions.

        The treasury market is global and treasuries are perfectly fungible. Presumably the people who had the yen that were converted (in 2 steps) to treasuries were in the market for treasuries before BOJ put their treasuries on the market. If BOJ had not sold these treasuries, the buyer would have bought them from another source, i.e., the Fed via QT or USG.

        The Fed is putting $60B/month on the market. The USG is putting ~$110B/month on the market. In August this amount of treasuries brought a price of ~3.75%.

        In September, the Fed/USG still put $170B on the market. Now foreign governments are putting an extra $230B on the market for a total of $400B in one month. Strong demand is an understatement since the price went up with increased supply. Does this mean the market is broken if an increase in supply causes price to go up?

        And then from the perspective of inflation, how does this work?
        -When the USG sells treasuries, it should be inflation neutral since the dollars that would be spent by people are spent by USG.
        -The Fed’s QT is inflation negative because they are reducing the supply of dollars.
        -BOJ USG sales should be overall inflation negative in Japan because money supply is reduced. On the other hand, this should be inflation positive in the US because the Japanese now have a relatively stronger money and can better compete against the USD for goods, thereby raising prices to those who shop in dollars. So BOJ sales of treasuries is inflation negative in Japan but inflation positive in the US?

        The real question I have is how will this affect my cost of living. It is all very complicated, but I think the bottom line is that the foreign sale of UST is bad for my wallet??? Am I missing something?

  4. Linkz says:

    I saw that you foreign governments sold ~$230 billion worth of US treasuries in September. What effect would this have on the Fed’s inflation fight for, now that we cannot ‘export’ inflation?

    I read that Xi will visit Saudi Arabia to sign an agreement to purchase oil in yuan. What effect will that be have on the US dollar and inflation?

    • Wolf Richter says:

      The 10-year yield dropped below 4% amid HUGE demand for Treasury securities. The Fed wants to tighten financial conditions, which means higher long term yields and wider spreads, among other things. But this huge demand keeps the yields down. So if anything, selling by foreigners would help the Fed tighten financial conditions, but it wasn’t nearly enough, and had zero impact, has you can see from the yields.

  5. THEWILLMAN says:

    Hearing stories of people who live in Japan and are paid in dollars paying $0.50 for a can of coke or $30 for a nice dinner for two…

    • Harvey Mushman says:

      I remember buying a can of Pepsi for $0.50… when I was in high school (1980).

      • Lone Coyote says:

        Back in early 2010s the vending machines were 60 cents a can where I went to college in Northern Alabama. Aside from a single one on the top floor of the engineering building that was 50 cents a can (more importantly, two cans with a single dollar bill). It was a sad day when that machine got “fixed”.

  6. Old school says:

    Hussman monthly article is out. Don’t know if he is right or not but sees sp500 bottoming at around 1500 and saying that cash earning 3.8% is probably best place to park right now.

    Anyway if he is right it fits the theory that US stock bubble is the third and final of the epic stock bubbles to bust. First was Japan, second Eurozone. Maybe all have a debt and demographics trigger.

    • Concerned_guy says:

      What’s the time frame in his article for this bottom?

      • Old school says:

        He doesn’t give a time frame. I don’t think it is that easy. Just the ball park of fair value when this cycle is done and people had rather have safety and not stocks.

        One interesting thing he points out is the worst time to hold stocks is when people are trying to get out of stocks AND Fed is cutting rates. It’s a good warning at least to me that just because Fed is cutting it’s not necessarily time to buy. Got to let the fear play out and get exhausted.

        In bull market everything goes up. Now you can see it’s a mixed bag with people probably over paying for defensives. If rates get high enough it will cause even the most defensive to be sold for safety of interest bearing cash.

    • Z33 says:

      He also said the S&P500 would return 3.6% a year between 2011 and 2020 back in his Dec 2010 article. So probably wrong again.

      M2SL is over $21T. S&P 500, and other assets, can’t go down too far simply because of how much money is out there.

      • Old school says:

        I am curious what happens when/if short term treasuries pay 5%. Surely stock market can’t have a PE of 20 or earnings yield of 5% when you can get that return in a safe instrument.

      • rojogrande says:

        “M2SL is over $21T. S&P 500, and other assets, can’t go down too far simply because of how much money is out there.”

        It depends on whether we get to a point where people would rather hold money than other assets. If that happens, assets can go down a long way. All the money out there is currently held by someone and they may not want to buy the S&P 500 or other assets at anything close to current prices. Time will tell.

    • andy says:

      Hussman is one of the smartest guys out there, in theory. After doing this for 40 years he finally learns timing is everything. One of his articles finally coincided with market top. Still, he will likely be right about the magnitude of losses, eventually.
      Jeremy Grantham on the other hand timed this bubble perfectly. Even predicting the melt-up phase. He got the magnitude of melt-up wrong: 3700 vs 4800 (actual top), big difference. Well, he says this bubble will be the most significant event in investors lives, not unlike 1929.

      • Harry Houndstooth says:

        John Hussman and Jeremy Grantham are accurate historians, logical thinkers and I believe will be correct in expecting the stock markets to be much lower before this bear market is over.

        I am betting on it.

    • Augustus Frost says:

      No, all are psychological. That’s how manias start and how it ends.

      Debt and demographics don’t buy or sell anything.

      • rojogrande says:

        Debt can force selling under many circumstance, one common form is a margin call.

    • VintageVNvet says:

      IIRC, and would welcome any one to remind me, otherwise or confirming, OS guy and I predicted S&P 1500-1800, and similar to other SMs…
      Certainly going to be interesting or even VERY interesting, at least…
      OK, going to be fun, fun, fun, for the ”feeble minded” as WE, in this case the investing WE, have said before and since.
      Have FUN with it kids….

  7. Rosebud says:

    Solar Eclipse April 20, 2023, so there’s your transit and governor exit.

    You can hope to be invited on a Pacific or Indian ocean cruise to bear witness, followed by a marriage proposal to a very well preseved Japanese princess.

  8. Harry Hv says:

    Unlike other countries Japan has not reorganized the currency to get rid of all the zeroes on the prices. The 3 or 4 zeroes on Japanese prices remain, a badge of shame worn by the Japanese Central Bank for some long-forgotten failure. Mr Kuroda is creating a new badge of shame to be worn by his successors, another couple of zeroes on the Yen prices

    • Wolf Richter says:

      There’s no penny-like unit in the Japanese currency system dating back to the 1870s. There is only one unit roughly equal to a penny, and that is the yen.

      However, the Japanese counting system doesn’t count in multiples of 1,000 (thousand) for 1,000 x 1,000 = 1 million, 1,000 x 1 million = 1 billion, etc.), but in multiples of 10,000 (man). If you have ¥10,000 in your wallet = 1 man yen. And there’s a banknote for that (roughly $100 depending on the exchange rate). Then the multiplier is 10,000 x 10,000 = 100,000,000 (oku), etc. So you may pay 5 oku yen (¥500,000,000) for some big piece of industrial equipment. The next one is 10,000 x 100,000,000 = … OK, you do the math… called cho. So someone bought a company for 5 cho yen.

      This system gives me a headache when I deal with large yen figures. It’s very confusing to our thinking in terms of the multipliers of 1,000.

      • YuShan says:

        I recognize this from China and Taiwan (where I lived 4 years) and where they have a similar system. For example, one million is literally “one hundred ten thousand” (Yībǎi wàn).

        I have learnt to always mistrust them when they mention large numbers in English, because for them our system is as confusing as their system is for us, so they are frequently a factor 10 off because of that.

    • jm says:

      Pre-WWII a yen was about $0.50 (ballpark). After the war they inflated the war debt away and set the value at 360 to the dollar, great for exports, until finally force to revalue to to about 275 in 1971 (my first year in Japan). In 1995 it peaked at 80 yen to a dollar. They made an intense effort to push it down. Businessmen were starting to get entirely to serious about importing American goods.

      Just so happens I’m in Nagoya (center for Toyota and its suppliers) right now, hiking up Mt. Tado every other day to get in shape and lose weight. An excellent light dinner is $12 including tax (no tipping here). I’m renting a nice furnished 1-br apartment with weekly maid service, half a mile from the magnificent city center) for about $2300/mo). The ads in my Twitter feed are all Japanese (which I can read). Many are for loans to cover unanticipated expenses.

      • jm says:

        Almost forgot to mention that prewar they had a smaller unit called the “sen”, essentially a penny.

  9. 2banana says:

    “Hamburger Helper” was introduced in the inflation 70s and became very popular…to stretch the minimal amount of what was once the least expensive meat available into a meal for a family.

    “People, society, and the economy are not at all prepared to deal with inflation.”

    • Anthony A. says:

      When I was a poor veteran on the G.I. Bill in college in the early 1970’s after the war, we ate HH without the H! (was OK too)

    • MiTurn says:

      “Hamburger Helper” was introduced in the inflation 70s and became very popular…”

      So was meat loaf (hamburger with added bread cubes) as a rationing strategy during WW2.

      • Ccat says:

        Uh, I love meatloaf! Meatloaf and mashed potatoes are the all American meal. I make a special sauce from canned tomatoes. The best recipe uses oats and is on the Quaker oatmeal box lid.

        Anyone know the history of this?

  10. Implicit says:

    Flavoring Japan’s inflation. Everything relatively similar and continuous:

    Japan’s unemployment rate is only 2.6%, however

    “The rate of annual pay growth for total pay was 6.0%, and the annual pay growth for regular pay was 5.4%, in June to August 2022; this is the strongest growth in regular pay seen outside of the pandemic period.”

    The largest union in Japan is asking for a 5% wage hike.
    “The rate of annual pay growth for total pay was 6.0%, and the annual pay growth for regular pay was 5.4%, in June to August 2022; this is the strongest growth in regular pay seen outside of the pandemic period.”

    When the world’s UNE starts spiking things will start to change.

  11. Nick Kelly says:

    My sister just got back from Japan, visiting her son and Korean wife. He bought his place in rural north on an acre for about 20 K US. 3 hr from Tokyo. House needs work which he’s doing. A few bonuses with the prop in garage: a Mitsubishi snow machine on tracks, a step thru Honda 70, in good shape. and found in wall some very old paper money. So old when they tried presenting it in resto, the waitress took it to manager. No prob. 50’s?

    He has worked hard on his J language, and was able to give a talk on local TV. Wife…not so much but people will start talking to her when they are out and about, hoping she will translate.

    There is deluxe ski resort nearby where Sis preferred to stay for about a hundred a nite, cuz travel still way down. Usually caters to Oz skiers. Not sure where but she took the 3 of them to lunch at an automated resto. They came in and a machine gave them a table #. Then they ordered off a screen or app? Little while later the stuff comes on a little train and stops at table. Tab was about 15 US. With NO tip.

    Sis liked Japan so much it actually crossed her mind to live there part of year. Her and I agree you would need at least a small community of English speakers for this to be viable, but otherwise it checks a lot of boxes.
    For one the virtual absence of personal or property crime.

    • Iona says:

      When did they buy? I’ve thought about south Kyushu. Would definitely need to learn Japanese, very little English spoken out that way

    • Implicit says:

      That some interesting “shoes on the ground” data in that story. Thanks

      • MiTurn says:

        My son lived and worked in various parts of Japan for five years. He has lots of stories to tell, including the super cheap housing in some places.

        But he says it’s a tough place to fit in. Fyi, white all-American type kid…who speaks Japanese.

  12. Michael Engel says:

    1) Ben Bernanke flew to Japan advising them to cut interest rate to zero.
    2) The real rates in Japan are minus (-)4%. Negative real rates cut debt.
    3) Japan 1M is (-)0.122. 10Y : +0.243. 40Y : 1.%. A sexy yield curve.
    In US the 3M is 4.25. The 10y : 3.83. In Germany the 3M is : 1.45. The
    10Y : 2.01.
    4) Central Banks stepping stones. US Fed raise rate sharply. Madam ECB
    followed JP. When all the major central banks will coordinate with each
    other gravity between them will be zero. In zero gravity environment
    there will be no friction. They can raise rate easily, but raising US rates
    to 7% is a futile attempt. The front end will be higher than the long
    duration : backwardation.
    5) Meanwhile US, Europe and Japan benefit from negative rates, at people
    6) Japan 3M is hugging the zero line since the early 1990’s. But in Mar
    2002 they popped up to 100%, before returning to zero.In Sept 1990
    Japan 10Y was 8.26. In Sept 1998 : 0.775. In July 2016 : minus (-)0.29.
    After a test in July 2019 the 10Y is up to 0.25.
    7) If we enter a global recession Japan 10Y might test/ breach the zero rates.

  13. Depth Charge says:

    These central bankers should be going to prison for what they’ve done.

    • CreditGB says:

      You didn’t get the memo did you. Only outsiders and people in the private business sector are to be charged and imprisoned.

      Remember the college pay for play thing? Those celebrities who played the long standing game and paid, went to prison, those to took the payola, and benefitted from it,…well, they didn’t.


  14. Michael Engel says:

    More and more countries joined the “Shanghai Cooperation Organization”. Next year Iran will become a member of SCO. The SCO is backed by commodities.
    China is buying oil from Russia, Iran and the Saudis in Yuan.
    The SCO might replace the dollar. Europe is flirting with China. In US we
    will play with ourselves. Made in China, Taiwan, Thailand….
    will cost more. COLA will rise, but inflation might rise higher. US gov debt might cont to fall, so is our standard of living.
    Medicine, cars, phones, food, shirts… will cost more. The poor will not be able to afford. US 10 high plateau at 4% : bs.

    • Nick Kelly says:

      Russia, Iran, economic powerhouses. Two drunks holding each other up. And so much in common! Does Putin dig Shia Islam?

      Russian economy WAS the size of Canada’s but supporting 140 million vs 40 million, but with 1 percent ripping off 10 percent off the top. How many Canadian multi-million dollar yachts do you read about? Now Rus economy contracting at record pace.

      Do you even remotely understand that the keys you are pounding on and the software would not exist if it was up to Russia?
      Not coincidentally both these power houses are on the verge of revolution.
      To think where Russia, first in space, could be today….for a reality check, check their auto ‘industry’. OMG.

  15. gametv says:

    What is interesting to me is that in Japan the categories where government is in control, inflation is being held down, whereas in the US, the areas where government funding of private industry – healthcare, higher education, housing – are all setting records in terms of inflation.

    There is something inherently broken in the way that government participates in our economy. I am amazed that not a single politician in the recent elections was talking about the problems with our healthcare system, which is the most distorted, bloated, corrupt system on the planet (for instance the paymaster billing in hospitals should be considered fraud).

    • Michael Engel says:

      UNH is 12% of the 30 Dow members weight. AAPL, CRM : 3%.
      UNH trading range : Apr 8/13 2022, 549/529.
      In order for the Dow to rise higher and make a new all time high UNH & Goldman must have higher backbones. Lower backbones and the lower trading range are waiting for the banking and the healthcare sectors.
      UNH might be in distribution. If so, the markdown might start.

    • Augustus Frost says:

      Well, if the politicians did talk about cost of healthcare, they have limited options to limit cost increases.

      Since we are all destined to die, there is theoretical infinite demand for medical care especially when in the US most consumers do not pay for it directly.

      Ultimately, there is going to rationing one way or the other and it’s evident it’s going to be politically driven eventually because the government budget is destined to run into a brick wall when rates soar in the future and the dollar sinks.

  16. Michael Engel says:

    In the sixties US Fed was a stand alone mountain.
    LBJ scared congress and the Fed. LBJ spent money on social programs
    and and wars in Africa & Vietnam, imitating JFK, to cover his bloody footsteps.
    He ordered the Fed not to raise rates. Inflation was raging, but the Fed obeyed the president.
    We know that Arthur Burns was a pussycat, but William McChesney was worse.

  17. Harvey Mushman says:

    In the article I read:

    “Repaid and maintenance: +6.9%”

    I’m thinking you meant:

    “Repair and maintenance: +6.9%”

  18. Swamp Creature says:

    Food inflation in Japan

    If fish went up 13.9% I wonder what beef went up to?

    I remember it was $35/lb when I was there in the 1970’s.

    Adjusting for inflation it should be $200/lb now. Ouch!

  19. LordSunbeamTheThird says:

    I am extremely interested in these articles Wolf.
    The Japanese can sell one trillion of US treasuries at 140 yen to the dollar when they bought them at 100 yen. When inflation takes off in Japan it will change the financial landscape of the world.

    However, I believe that the Japanese government is already trying to stop the wheels coming off and is past reform because;

    1) If your stated goal is wage inflation (and it is), then why would you have a guest worker program from low wage countries.
    2) If your stated goal is wage inflation (and it is), then why would you dismantle all the proposed protections against unpaid overtime.
    3) What government wouldn’t become addicted to spending, with all the associated pleasures of the “water trade” to compensate for an innate desire to save of the population generally.

    There is no labour law in Japan, there is, but there are no penalties if you ignore it.

    However, my wife works at a Japanese university and is grumbling with her co-workers about why the salary is so low and why they get terminated at 5 years as well (to avoid the liability of the law as applicable to full-time workers. I’m white personally and the Japanese are unlikely to speak honestly to me but this kind of grumbling is new, low level but new.

    I know I got flack before for my suggestions that when the BoJ sell treasuries it doesn’t affect US inflation and believe me I did think about it. But my reasoning is this, treasury yields are a -reflection- of inflation, not a driver, because inflation is purely and simply a product of the quantity of money in circulation. So I believe that when the Japanese eventually offload their 1 trillion of treasuries, it will increase borrowing costs without reducing inflation because the treasuries will just change hands. There will be an additional trillion for sale, but the monetary base of the US will not reduce. You may argue I think that the increased borrowing costs -from that- will reduce the monetary base but that is something coming down the road, it hasn’t hit the car.

    The inflection of Japanese from buying treasuries to selling will change the market IMO. (and I use these capitals modestly)

  20. JeffD says:

    Thanks for this article! I had no idea that rent in Japan was so ridiculously cheap! I believed prices would be much higher, remembering the multi-generational mortgages that were offered in the 1990s. It looks like you can rent a decent one bedroom place for about $600/month. I’m guessing that it is difficult to find a landlord that will rent to non-Japanese?

    • Wolf Richter says:

      For people who earn their income in USD, Japan is no longer ridiculously expensive. Some things are cheap. But don’t expect your apartment to be the size of an apartment in the US.

      But Tokyo, Osaka, and some other places are a lot more expensive than the rest of Japan. Rural Japan is dirt cheap.

    • jm says:

      In Nagoya Freebell Apartments specializes in renting to foreigners, especially English teachers.

  21. AverageCommenter says:

    Japan as a society has become obsolete. Today they have a population of 125million, in year 2100 their population will be around 85,000,000. Their society is resistant to procreation and they no longer are good at innovation. The 1980’s marked the end of their creativeness with stuff like the Nintendo, anime and cartoons, the walkman, etc. In days of old, they bullied China and the Koreas – who never forgot but now the rabbit has the gun so there ain’t no fun. Our military is the only reason Tokyo is not in ruins today. They had a nice run but it’s over. Only thing left to say sadly is… Sayonara

    • jm says:

      The Japanese median IQ is about 106. That’s not just 6% better than the median white American. IQ scores are not linear. On one of Eysenck’s “Check Your Own IQ” tests it would equate to solving successfully about 40% more problems in 30 minutes than someone with IQ 100, and as the problems becomes successively more difficult, those would be harder problems.

      This evidences itself in a great many little ways. It means your typical Japanese is at about the same ability level as a typical American in a moderately well-to-do suburb (and vice-versa).

      The Japanese will do just fine.

      • Randy says:

        Matters what IQ test you take. My MENSA IQ score is 133. I consider MENSA the best but it only goes to 145 if I remember correctly. I’ve taken other IQ test and have got 153. Mensa was a much harder test. They all have a average of 100 as the peak(average IQ). You must have a 130 IQ to be qualified for MENSA. The test cost around $75 and there are places scattered about where you can have it administered.

  22. dang says:

    Thanks for this article on the metrics pertaining to the Japanese economy. I have never been exposed to these metrics is such a concise manner.

    As the opinion storm began to form in my cerebellum, about how the data from an economy that I, as I said, have never been properly exposed should be interpreted.

    After wrestling with several ideas, my thoughts began to coalesce into clarity-ish fog of uncertainty.

    It is amazing that they have been successful at QE for so long and their inflation rate, if comparable, would be envied by the American financial wild west that has developed.

    Good luck, Japan.

    • dang says:


      I have to remember that Japan wasn’t invented in 1945.

      As I look at America’s side of the street where the Fed’s QE was part of a strategy by the aristocracy to help install gambling as one of the only industries with potential the potential to exploit what was left on the carcass of America.

      Then came covid which, like plagues before it, empowered the working class that could still work to regain that economic power. A renaissance.

      • dang says:

        “A French word that means “rebirth”, in English, according to the Encyclopedia Britannica site:

        “It refers to a period in European civilization that was marked by a revival of Classical learning and wisdom.”

        perhaps. Maybe. Not sure what Classical learning means but okay if it’s parallel to the concept of craftmanship as prerequisite of invention.

        Wisdom is one of those undefinable human mind candies. You know it when you see it. Wisdom can often be observed in the status of the diaspora that claims to posses it.

        • dang says:

          I’m fairly certain, having creatively collaborated with some fine French people, the word “renaissance”, has a significantly different intonation than the dry English translation would suggest. Certainly more creative.

  23. Barden says:

    The norm under noninflationary monetary policies would be perpetually falling prices due to technological progress. The former could be a gold standard but not necessarily; Peter Warburton wrote an essay on that in 2001 :”The debasement of world currency: It’s inflation, but not as we know it”. So even apparently zero price inflation could occur with CB money printing.
    The last thing governments want is that your nominal income goes farther in purchasing power, because they cannot screw you over with increased taxes using fiscal drag (taxing nominal wage increases that do not keep pace with inflation).

  24. Old school says:

    Central banks and easy money. They all have one thing in common over 20 years.

    Gold vs Dollar 4X plus
    Gold vs Euro 4X plus
    Gold vs Yen 5X plus
    Gold vs Pound 6X plus

  25. DP says:

    If QQE and Abenomics are the reason behind this inflationary impulse wouldn’t it have materialised 7-8 years ago? The period between 2016-2020 has periods of disinflation and very moderate inflation.
    Given the nature of their economy where a lot requires to be imported wouldn’t most the inflation be attributed to a strongly rising dollar against the yen?

    • Wolf Richter says:

      As I said many times before: it’s like a dam broke, and the inflationary mindset kicked in and inflation washed over the land tsunami-like. Same in the US and Europe, only faster and sooner.

  26. Neel Kash & Kari says:

    Wow zero rent inflation and almost none in healthcare. Must be nice.

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