Japan Food Prices:

 Article Source: https://mainichi.jp/english/articles/20220921/p2a/00m/0bu/012000c

Article:

TOKYO -- Price increases for food items as well as utility bills that are closely linked to people's daily lives are set to peak in October in Japan.

Price rises in October are expected for over 6,500 food items, as well as gas bills and fire insurance premiums. As the consumer price index rose in August at a high rate not seen in some 31 years, there is mounting concern over whether household finances and the Japanese economy can endure the autumn price hikes.

Ideas:

Of these 6,500 food items, how many of them already had a price increase for example last winter, last spring, or in the summer, as prices continue to increase and companies feel they need to keep increasing prices as prices continue to increase and they need to maintain their profit margins.

All of these price increases become a synergistic effect meaning it doesn't just effect one area of an economy it begins to effect everything, every sector in an economy.

There is a limited supply of money that is always moving around in an economy, and as such as one area/sector begins to have challenges it might be a challenge for other sectors or or other areas in an economy.

Ass prices keep increasing, and as the disposable income of families begin to shrink they begin to think how to strategically use their scare disposable income. 

So they see prices increasing at restaurants so they limit the times they do to out to eat at restaurants, and as prices and they see the prices of take-out food has also increased they limit the number of time they might get take-out food.,

So the mother goes to the supermarket and sees even her normal food choices have increased so she either looks for good substitutes at a good price or limits what she buys.

And then she looks for something even on line at Rakuten or Amazon Japan, or some other online shopping platform and she sees the same thing.

And then the family might want to go on a trip and tries to use the new travel program which helps with the hotel cost, but everything else about the trip is just too expensive for them to take a trip at this time.

And it continues on in the economy with many families and individuals, and as such many sectors are effected and lose out with less overall spending in the economy.

Article:

Kewpie Corp., which will implement a 2 to 20% price increase for 93 items, including mayonnaise, to be shipped from Oct. 1, released a statement saying, "Under tough circumstances, the company as a whole has worked to streamline operations and curtail expenses, but it is extremely difficult to absorb cost rises through the company's efforts alone. We decided that we have no choice but to alter prices."

NH Foods Ltd., Itoham Foods Inc. and Marudai Food Co. will also raise prices for ham and sausages for industrial and home use from Oct. 1. Meanwhile, the four major beer producers in Japan were quick to announce as early as between April and June that prices will be increased by around 10% for beer, canned shochu and other products from Oct. 1.

Ideas:

So companies are strategically increasing prices and at the same time trying to be more productive in how they do things to see if they can reduce costs too.

What is not been said is related to employees. In western companies sometimes, unfortunately, the first cost cutting measure is the reduction of employees. But as Japanese companies find it a challenge to layoff workers, maybe most workers are safe from the western strategy of employee cost cutting to reduce costs and maintain profit margins.

Unfortunately maybe for some even a 2 to 20 percent or even a 10 percent increase for some products might be too much and maybe, if they can, they search for substitutes at a lower price, if there are any.

As inflation is still very much an individual thing, meaning the price increases might effect each person or each household differently depending on what like and what they buy it can't always be assumed that the price increases effect everyone the same.

Article:

Conveyor belt sushi chains Kura Sushi Inc. and Akindo Sushiro Co. have also announced price revisions from Oct. 1, as part of sudden moves within the restaurant industry. The wave of price hikes starting Oct. 1 has been spreading throughout various sectors.

According to a Teikoku Databank Ltd. study targeting 105 food companies, price increases are expected for over 6,500 items in October, a sudden peak compared to earlier periods of 2022, when price rises were seen for up to around 2,500 items at the most per month.

"October is the start of the fiscal year's latter half. It can be thought that one reason behind the October price hike is that it is easy to make adjustments with clients and affiliated parties," a Teikoku Databank representative commented. They added, "There also seems to be the aspect that companies are conscious of the high demand season."

Ideas:

Most likely many companies such as the sushi companies did estimates on just how much they can increase prices and not lose all of their customers. So they strategically estimated a 5 percent or 2 percent or 10 percent increase will maintain their customer base and at the same time reduce their expenses and maintain the current profit margins.

So just what is considered the high demand season? Is it the beginning of the soon holiday season which includes a lot of companies parties, end of year celebrations, including the traditional gift giving period in Japan at the end of the calendar year?

Or are they making the price increases now just before the high-demand season begins as during the holiday period there are going to be be a lot of demand and some companies want to take advantage of the increase in demand as a way to makeup for the losses of the previous two years.

Article: 

For example, summer is the busy season for beer and beverage manufacturers. If they adjust the period of price rises to October, they can avoid a situation where buyers and consumers stop making purchases during the high demand season. On the other hand, processed food products are popular during the winter. It can be said that by raising prices ahead of the season for hot pot items, companies are trying to cover for rising raw material costs by increasing product prices.

Following the price hike peak in October, price rises would have been implemented for over 20,000 food items since the beginning of this year. "In addition to cooking oil and other ingredients, costs of packaging material, containers, logistics equipment, and other items have been rising. This year, price rises have been occurring for most food items and beverages," said the Teikoku Databank representative. As the average price increase rate has reached 14%, family finances are under a major strain.

Ideas:

So companies are very aware when is the best time to increase prices as beer and beverage companies recognize increasing the prices in the summer instead of October might have seen decrease in sales while in October they might not see a big decrease.

And then companies that supply hot pot items they are going to increase prices just before the demand for those kinds of product begin to increase instead of increasing prices during the hot pot season.

Companies obviously know when is the best time to increase prices which maintains there customer base and at the same time keeps their profit margins in the black.

And again maybe a 14 percent increase might not be big deal for some and they see the price increases but they are not stressed too much but for some or many even a 14 percent increase might be too much and again they begin to cut this or reduce this or this reduced spending begins to effect many sectors in an economy.

Article:

Mizuho Research & Technologies Ltd. calculated estimates on the burden imposed on household finances, assuming that the yen will continue to hover in the 145 yen zone against the U.S. dollar. It estimated that each household in Japan will shoulder an increased burden of over 100,000 yen (about $700) per year due to price rises. The institute found that even when factoring in the effects of the government's countermeasures against higher prices, family finances will shoulder an extra 82,000 yen (about $570) per year. Of this increased burden, about half, or 39,000 yen (approx. $270), is the result of increased food prices, while rising energy prices, including electricity and gas bills, as well as gasoline expenses, can be attributed to the estimated extra household finance burden of around 34,000 yen (roughly $240).

Ideas:

So it looks like there are some very good estimates here regarding just how much inflation is going to effect households within a year.

Even if it is 100,000 yen or 82,000 yen that might be too much for some families as maybe some are living paycheck to paycheck. And for those on fixed incomes or low income groups a loss of even 82,000 yen might be too much.

For low income groups or fixed income groups even 39,000 for food items is too much as low income and fixed income groups spend a larger percentage of their income or disposable income on food than higher income groups.

And then add in the increased estimates related to energy prices and now there is even less disposable income to use outside the home other things in the Japanese economy, which again means less for every other sector in the economy. 

In this situation disposable income would mean after the food bills, and home energy bills, and other household expenses are paid the amount left over to use in the economy outside the home.

Article:

Saisuke Sakai, chief economist of Mizuho Research & Technologies, pointed out, "The primary cause of the current hike in prices is the rising costs of daily necessities, including food and energy prices. This is directly leading to an increased burden on family finances." He commented, "It is certain that the tendency to cut down on expenses will grow stronger among consumers, especially low-income individuals who will be careful to avoid nonessential and nonurgent spending."

While households are feeling the pinch from surging prices, domestic wage levels remain stagnant. It seems that rising costs will deter consumer spending, which had finally been showing signs of recovery since the coronavirus outbreak.

Ideas:

So yes, low-income groups are having the most challenges as they always have less resources to cover the surge in prices.

But the surge in prices will most likely effect the middle class or middle-income groups too as maybe they have more expenses to cover compared to the lower-income groups such as high car payments, high house or mortgage payments, child in university tuition payments and so on.

So again every group but maybe the higher-up income groups will deter or reduce spending on many things which is going to have an effect on the overall economy.

Consumer spending has always been the weak link in the Japanese economy as Japanese consumers just don't spend like their western counter-parts. For example in many economies consume spending is upwards of  60 percent or more of GDP but in Japan might only be about 50 percent of GDP.

So even though as the pandemic has been winding down and Japanese consumers are out more and more and maybe spending more than before the continued increase in prices will eventually begin to have an effect on consumers and again spending might be less than expected or wanted by the Bank of Japan.

Have a nice day and be safe!