Japan Food Prices: Updated Dec. 14

 https://mainichi.jp/english/articles/20211123/p2a/00m/0bu/023000c

Article:

TOKYO -- Prices for bread, cooking oil and other products people use in their daily lives are going up one after another in Japan, placing a heavy burden on household spending. How far can prices on goods rise, and what effect will this have on living standards?

"I feel like everything except vegetables is getting more expensive. It's difficult for people living on their pensions," said a woman in her 70s out shopping at the main branch of supermarket Akidai Sekimachi in Tokyo's Nerima Ward. She said she had felt strongly that many goods, including bread and cooking oil, had gone up in price recently.

Ideas:

There is the idea that companies are reluctant to increase prices for consumers and they feel they might lose some or many customers. But that must not be the case, with some companies, now in Japan, as maybe their supply costs are increasing at a rate that they can no longer delay in increase in prices that they charge consumers/customers. 

There is always the option that the Japanese government might resort to price controls as a way to lesson the stress of consumers who are on fixed incomes. And or they could do what they are going to do with oil suppliers and give subsidies to the suppliers not to raise prices any more for the good of households and firms.

But that is maybe interfering in the natural operation of a market economy in that they are using artificial controls that could disrupt the normal flow of a market economy. 

Some might say let the market be natural and let the prices be natural and the will eventually get back to some kind of equilibrium in related supply and demand.

But the problem is how many fixed income consumers have to suffer before the prices level out back to some kind of normal.

Article:

She lives with her husband. Although they were making efforts to save by using frozen foods that can be eaten little by little while staying good, she couldn't hide her concern: "It seems all sorts of things are going to get more expensive. If prices get much higher, I'll reach my limit on what I can do."

Supermarkets, too, are struggling with what retail prices to set for the increasingly expensive products they stock. Hiromichi Akiba, head of the Akidai chain, expressed frustration: "Gasoline has gotten expensive, and transport costs have risen. It's quite difficult. But if prices keep going up then we might lose customers."

Ideas:

Consumer spending is going to become even more constrained meaning the increase in prices is going to reduce spending even more than what it is now.

And the pensioners, who tend to spend less than the average consumer now will have to spend even less. And then add in the regular consumer, who is not a pensioner and it might get even worse.

Pensioners and regular consumers are not the only ones feeling the increase in prices. The other side of the supply chain is the supermarkets. They of course know that their customers don't like increases in prices but now they have gotten to the point they feel they have no choice but to raise prices as their profits margins keep decreasing every month, and they can no longer delay price increased.

Gasoline prices increases, transport price increases, increases in products and food that supermarkets get from their suppliers all affect the profit margins of supermarkets.

And they know that they might lose customers as customers seek out and search for alternatives or substitutes which might have lower prices. 

Article:

Price revision announcements from food manufacturers and restaurant chains are coming steadily. Nisshin Seifun Group's Nisshin Foods Inc. has revealed that from January 2022, 151 of its products -- including home flour goods and others -- will have higher price tags.

The economic recovery from the coronavirus crisis and resultant steeply rising demand for wheat in China and poor harvests in the U.S. due to poor weather conditions have led to the Japanese government raising the sale price for imported wheat, which it reviews every six months. In response to rising flour prices, Yamazaki Baking Co. will from January 2022 raise the prices on a total of 247 products including toast bread and sweet bread by an average of 7.3%.

Ideas:

The price revision announcements might be like the 2014 and the 2019 sales tax increase. If consumers know or are told that there are going to be increases in prices, consumers, like in 2014 and 2019 might try to buy as many things as they can before the price increases actually take place.

In the Q1 in 2014 before the sales tax increase on April 1, consumers went on a spending spree and bought a lot as they didn't want to pay the 8 percent increase from 5 percent. But in Q2 of 2014 consumer spending decreased a lot. But as normal by Q3 consumers had gotten used to fact that they had no choice but to accept the 8 percent sales tax.

And again in September of 2019, many businesses in September were holding sales tax sales as a way to get consumers to buy before the Oct. 1 sales tax went from 8 to 10 percent. 

As I was in Yokohama in September of 2019, and at Yokohama station and the thousands of stores there it seemed like every store at Yokohama station (eki) had some kind of sale. And the same at Landmark tower and all of its stores.

But what was interesting later, and yes consumer spending decreased over the next few months but got back to some kind of normal after consumers again accepted the fact that they had to get used to the higher sales tax, was some consumers, maybe many regretted the idea that they went on some spending sprees for some products and bought a lot in anticipation of the sales tax increase.

So it will be interesting to see if consumers, in this situation, a little different but similar, will go increase their spending in December if companies are announcing that they will be increasing prices in January.

Article:

But rising costs are going further than flour. Estimates by the independent administrative institution the Agriculture & Livestock Industries Corporation, show that wholesale prices for short plate, a U.S.-made, relatively cheap cut of beef often used in gyudon beef bowls and all-you-can-eat Korean BBQ, have risen precipitously since this spring. By September, prices were more than 80% higher in a year-on-year comparison for three consecutive months. There are reportedly numerous factors at play, including reduced operations at meat plants due to the pandemic, rising demand in China and elsewhere, and resultant container shortages causing freight costs to rise.

Ideas:

So there are a lot of reasons for the increases in prices. And the usual idea that companies in Japan have been reluctant to increase prices might soon be a relic of the past, as an increase in prices seems to be affecting almost every industry in Japan.

If there is a positive in any of this, this might be the incentive that Kishida needs to promote even more his idea that companies increase salaries of their employees as a way to reduce some of the stress of higher food prices.

But of course maybe not all companies can afford to increase the salaries of their employees, if those companies themselves are seeing their profit margins decreasing because of energy costs, shipping costs, supplier price increases and so on.

Most likely the Japanese government is going to have to use some of its proposed new budget to try and help companies and consumers with the increase in prices if they continue to go up.

Again just the idea of giving subsidies to suppliers in the food industries as a way to help them not raise prices on supermarkets and restaurants for the good of society. If the Japanese government can do it for oil and gas suppliers they can surely do it for supermarket and restaurant suppliers.

Article:

Due to surging beef import prices, gyudon beef bowl chain Yoshinoya Co. made the decision on Oct. 29 to up its prices. Its regular size bowls are getting more expensive for the first time in seven years, and a customer ordering one to eat in with 10% consumption tax added will go from being billed 387 yen (approx. $3.4) to 426 yen ($3.7).

Soaring soy bean prices are also contributing to the problem. The effects of the African Swine Fever virus have depressed pork production, and to stimulate greater pig cultivation Chinese producers are importing more and more soy beans to be used as animal feed. Additionally, with the world strengthening moves away from fossil fuels, demand for soy beans in biofuels has also risen. Kikkoman Corp. will raise prices on soy sauce and soy milk delivered from Feb. 16, 2022. It is the first rise since 2008.

Ideas:

The pandemic has caused or created all kinds of problems besides just the virus itself and it looks like all of the problems besides the virus situation are not going away anytime soon.

And as the article shows, no country is isolated as now almost every country is connected through supply chains and other areas and no country is safe from what one country has as its problems now all countries can have similar challenges. 

As now no one can say inflation has not come to Japan. But of course it might be much worse in the EU and the US but the Japanese government needs to figure out what to do with the increase in food prices, the most basic need for every person in the Japanese society.,

While the rich, in every country might not even notice but the average consumer sees what is happening and feels it in that they have less to spend as the value of their yen is less now than a year ago, and it might continue to get even worse.

So maybe again its time for the Japanese government to intervene in the market economy and try fix what areas in can related to food prices for the good of society, without causing harm to food suppliers and try find a balance to help food suppliers and consumers.

Most likely this is not the kind of inflation that the Bank of Japan wants with its 2.0 percent increase in inflation that it has been trying to achieve for many years. Perhaps it would prefer to see a 2.0 percent increase in consumers spending as opposed to supplier inflation.

Have a nice day and be safe!