Morning Brief – Japanese Inflation

Japanese Inflation

Generally when a country’s wholesale price inflation hits a 13 year high, markets reach for tin helmets and dig in, but in the case of Japan it has been met with more ho hum and smiles of disbelief given the lack of meaningful growth in Japan for many years. Global commodity inflation and a weaker Yen have pushed up raw material import costs for a broad range of goods. The question for Japanese households is how much of that wholesale inflation will be passed on to consumers where CPI is still around Zero owing to persistently weak consumption which shows no sign of changing post pandemic. Wholesale prices rose 1.1% in July with many raw materials jumping: wood for example is up 33% in July from where it was in July 2020 and oil and coal up 38%. USD/JPY at 110.40 half a Yen up from it’s 1 year low in July.

UK Growth

The UK economy grew a stonking 4.8% in Q2 following the snapback in the wake of pandemic stimulus measures and a return to work. This puts the UK at the top of the tree among the G7 economies. The reason for this large growth is in part due to the cautious re-opening of the economy in June post Lockdown. GBP firm rather than frisky on the UK Chancellor’s upbeat messages at USD 1.3850.

Chinese ports

Shanghai and Ningbo, China’s top two container ports are experiencing worsening hold ups following the closure of the Meidong container terminal in Ningbo due to the reported detection of a Covid case-just one? This has resulted in 40 container vessels waiting to dock at Zhoushan, the outer anchorage of Ningbo. Many vessels are being re-routed to Shanghai where 30 container vessels are currently queuing. All this comes in the wake of Typhoon In-Fa which reduced container handling in late July. Meanwhile in Southern China covid containment measures in ports near Shenzhen led to similar numbers of container vessels being held up. So what does it mean for shipping rates? Inevitably costs are rising further with rates for a 40 foot container reaching $20,000 on the China to USA route exacerbated further by increasing retail orders ahead of the H2 shopping season putting strain on global supply chains. So in a nutshell it will take longer and cost more for the West to source goods manufactured in China.

USD/CNY at 6.48.

We are Never Getting Back Together

It was this day in 2012 that Taylor Swift released this gem (which turned out in fact to be somewhat prophetic) about her then paramour Jake Gyllenhaal who was given his marching orders after a tempestuous 2 months which clearly had not run that smoothly. The lyrics suggest that Taylor Swift was really quite sure about her decision-so there:

I remember when we broke up, the first time
Saying, “this is it, I’ve had enough”
‘Cause like, we hadn’t seen each other in a month
When you said you needed space (what?)
Then you come around again and say
“Baby, I miss you and I swear I’m gonna change, trust me”
Remember how that lasted for a day?
I say, “I hate you, ” we break up, you call me, “I love you”

Ooh, ooh, ooh
We called it off again last night
But ooh, ooh, ooh
This time, I’m telling you, I’m telling you

We are never ever, ever getting back together
We are never ever, ever getting back together
You go talk to your friends, talk to my friends, talk to me
But we are never ever, ever, ever getting back together
Like, ever

I’m really gonna miss you picking fights
And me falling for it, screaming that I’m right
And you would hide away and find your peace of mind
With some indie record that’s much cooler than mine

Ooh, ooh, ooh
You called me up again tonight
But ooh, ooh, ooh
This time, I’m telling you, I’m telling you

We are never ever, ever getting back together
We are never ever, ever getting back together
You go talk to your friends
Talk to my friends, talk to me (talk to me)
But we are never ever, ever, ever getting back together

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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