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ECONOMY

Japan’s inflation spreads to tuna and beef bowls, slamming households

  • February 19, 2022
  • , Nikkei Asia , 7:34 a.m.
  • English Press

TOKYO — Having suffered from decades of deflation, Japan is now seeing price hikes spread to a range of items, from electricity to mayonnaise, squeezing household budgets by raising costs for basic necessities and services.

 

But it remains unclear whether these price increases — driven by higher energy costs; higher prices for ingredients and a weaker yen; as well as supply issues — will lead to sustained inflation that will also boost wages.

 

The consumer price index for January, released by the internal affairs ministry on Friday, rose only 0.5%. But a look at individual items shows signs of inflation, with the prices up 28.5% on the year for yellowtail, 16.5% for tuna and 22.5% for octopus.

 

Behind this is the rise in crude oil prices. Energy prices spiked 17.9% in the CPI, the sharpest gain in 41 years. Higher fuel costs for fishing boats led to higher seafood prices. Strawberry prices jumped 24% on higher costs to heat greenhouses.

 

A CPI version that excludes fresh food is often used to gauge price trends, since food prices tend to fluctuate wildly. This index edged up just 0.2%.

 

However, a different picture emerges after removing special factors that have been pushing down prices. Mobile phone communications fees plunged 53.6%, depressing the CPI’s growth by 1.47 percentage points, thanks to the introduction of cut-rate plans by mobile carriers last spring.

When this factor is excluded, the CPI would have climbed almost 2%, according to the ministry.

 

The weaker yen also lifts prices by making imports more expensive, and several major food manufacturers have passed on higher costs to consumers since January. Prices rose 12.9% for mayonnaise, 12.3% for pre-cooked curry and 11.2% for margarine in the CPI.

 

The higher prices have spread to restaurants, with the price of beef bowls up 9% as the three big chains all hiked prices since autumn. Imported beef prices were up 10%, compared with a 2.1% gain for domestic beef prices, as a result of the softer Japanese currency.

 

The third factor is the supply problems seen globally, including the semiconductor shortage and supply chain disruptions. This has led to higher prices as manufacturers are unable to procure the parts they need.

 

Camera prices rose 12.3%, partly because major players such as Canon, Sony and Nikon focused on manufacturing high-end products to secure profits. As a result, some store shelves for low-priced models have been empty since autumn.

 

The corporate goods price index has remained high, growing 8.6% in January, and the higher costs for companies has put upward pressure on the CPI. But unlike in the U.S., where the CPI surged 7.5% in January, it remains unclear if the price uptrend in Japan will strengthen.

 

One major difference between Japan and the U.S. is wages. U.S. average pay gained 5.7% in January, according to employment statistics, but Japan’s nominal wages were roughly flat in December.

 

“Japan is not experiencing a serious labor shortage as in the U.S. and Europe, so we’re not seeing signs of an increase in wages,” said Ryutaro Kono at BNP Paribas Securities.

 

Inflation has proved elusive in Japan. A temporary increase in prices only cools consumption, unless consumers gain more purchasing power. As a result, companies are hesitant to pass on higher costs to consumers.

 

“Weakness in domestic demand will remain, so the rise in the CPI will come down to around 0.5%” once the increase in resource prices settles down,” predicts Hideki Matsumura at the Japan Research Institute.

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