As costs soar, some Japanese companies do the unthinkable: raise prices
11/01/2022 23:00
By Kantaro Komiya
TOKYO, Jan 12 (Reuters) - Premium telescopes, violin bows
and speciality paper are bucking a deflationary trend that has
defined Japan for decades - all have had their prices hiked by
companies confident they can charge more without losing
business.
Years of stagnant prices and wages have made Japan Inc
nervous about charging more for fear of alienating shoppers and
losing market share. Traditionally, firms have chosen
belt-tightening in the face of rising costs. urn:newsml:reuters.com:*:nL8N2SJ0BZ
While the overall rise in prices is still modest https://www.reuters.com/markets/asia/japan-nov-wholesale-inflation-spikes-rising-raw-material-costs-2021-12-10,
more firms are opting for increases, led by market leaders
often with speciality products, as commodities and transport
costs soar due to the COVID-19 pandemic and a weakening yen
makes fuel and imports costly.
Vixen Co Ltd, which commands nearly 60% of the local market
for astronomy telescopes, plans to increase prices of its best
selling lower-end models by as much as 24% from next month, to
74,800-169,840 yen ($650-$1,500).
"If costs go up and we don't increase the prices, it will
have a big impact on us, so we had to start there," spokesperson
Yasuhisa Tsuzuki said, adding Vixen had also been impacted by
rising wages in China where it manufactures.
So far, there has not been a consumer backlash, he said.
"Few people care when the price of an astronomy telescope
goes up," Tsuzuki said. "But a hike in the cost of milk or eggs
will be reported as big story on every single news show."
urn:newsml:reuters.com:*:nL4N2R314T
Tokyo-based Shirakawa Sogyo Co Ltd, which has been importing
and selling violins since the 1960s, this month raised prices of
some Swiss-made bows by as much as 36%, to up to 539,000 yen.
A strengthening Swiss franc against the yen has added to the
squeeze on already tight profit margins, company President
Susumu Shirakawa said.
Now may be an "easier time" to raise prices because costs
are generally going up for everyone, he said.
"Some of our competitors are doing it as well."
CAUTIOUS HIKES
Goods sold to other businesses are seeing bigger price
increases than those sold directly to consumers, according to
official data.
Wholesale inflation, which reflects the prices firms charge
each other for goods, rose to a record 9% in November, while the
core consumer price index ticked up 0.5% from a year earlier,
the highest in nearly two years. urn:newsml:reuters.com:*:nL4N2SU4DU
Final goods prices rose just 4.6% in November even as raw
material costs spiked 74.6%.
Retailers, for instance, generally allow food suppliers to
hike prices only when the cost of raw materials jumps 20-30%,
said Takao Sekine, executive director at Food Marketing Research
and Information Center, a Tokyo-based industry think tank.
Less than that and food companies are forced to resort to
"shrinkflation" https://www.reuters.com/world/asia-pacific/global-costs-soar-japans-shrinkflation-gets-harder-swallow-2021-12-03,
Sekine said, where they offset costs by making products
smaller.
Even companies selling directly to other businesses say they
are careful about the size of their increases.
Nippon Paper Industries Co Ltd 3863.T , which accounts for
around 40% of the domestic paper market excluding cardboard, is
raising prices of some products by 5-15% in the next few months.
But it is limiting increases to products where it is a
market leader, such as the "gable-top" cartons used by milk
producers, according to spokesperson Tetsuo Egawa.
"It's hard for a company that's not a top player to be the
first to raise prices," Egawa said.
TOUCHY TOPIC
Japanese companies often describe price hikes as something
they do as a last resort when costs cannot be absorbed by
corporate efforts - a euphemism for cost-cutting.
Sangetsu Corp 8130.T raised prices of wallpaper, curtains
and flooring materials by around 15% in September, which a
spokesperson said was partly on behalf of the industry, to
ensure other companies would be able to stay profitable.
Top stationery maker Kokuyo Co Ltd 7984.T raised the price
of scissors, staplers and other metal items by around 8% from
Jan. 1, but it limited increases to fewer than one out of every
six items in its stationery line-up.
"Our internal streamlining could no longer address the rise
in steel prices," said Hideki Kubo, a spokesperson.
($1 = 115.2700 yen)
(Reporting by Kantaro Komiya; Additional reporting by Kentaro
Sugiyama; Editing by David Dolan and Himani Sarkar)
((david.dolan@tr.com; +81 3 6441 1526; Reuters Messaging:
david.dolan.thomsonreuters.com@reuters.net))