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Japan’s companies having difficulty passing higher costs on to consumers

  • April 13, 2022
  • , Nikkei
  • JMH Summary

Nikkei reported on the latest BOJ data showing that the producer price index, which indicates the cost of goods traded among companies, rose 9.5% in March from a year ago, as the war in Ukraine is sending prices for energy and raw materials soaring. The index has increased more than 5% for 10 consecutive months. While the same index hit 9.7% in February, a level not seen in more than 40 years, the consumer price index for the same month was only 0.9%. This means that Japanese companies have not been able to pass higher raw material costs on to consumers by raising sales prices. The 8.8-point gap between the producer and consumer indexes was four times higher than that of the United States, which was only 2.1 points. The daily said that if such a trend continues, the Japanese manufacturing industry will end up losing 14.1 trillion yen ($112 billion) in revenue this year, emphasizing that unless higher costs are shouldered by consumers, businesses will have no choice but to reduce staffs or cut salaries, which would also lead to dismal consumer spending and prolonged price deflation.

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