Hit by higher costs, more Japan firms are raising prices - Reuters poll
25/05/2018 24:00
* 45 pct of firms are raising prices vs 37 pct in Jan
* 54 pct plan to keep prices steady or cut, vs 64 pct in Jan
* Firms hit by higher materials, labour and transport costs
* Cost-driven inflation makes path to sustained growth
difficult
By Tetsushi Kajimoto
TOKYO, May 25 (Reuters) - A growing number of Japanese firms
are raising prices as they grapple with a jump in materials,
transportation and labour costs, although a slim majority
remains skittish about doing so, a Reuters poll shows.
The results highlight apparent progress, albeit slow and
uneven, in Prime Minister Shinzo Abe's fight to rid Japan of
deflation - seen as the root of decades of economic malaise.
But analysts say that because higher costs and not growth in
demand are behind the price rises, the danger is that consumers
are more likely to keep a lid on spending over the longer-term,
complicating the country's path to sustainable growth.
Some 45 percent of firms in the May 9-21 Reuters Corporate
Survey say they have raised or plan to lift prices in the
financial year that began last month. Around half plan to keep
prices steady and 4 percent are looking at lowering prices.
"Raw materials, personnel costs, the cost of transport -
they've all risen as a matter of course and we don't have the
ability to absorb that any more," wrote one manager at a metals
firm.
By comparison, in January 37 percent of companies said they
had raised or were planning to lift prices this year, while the
rest were thinking of keeping them flat or reducing them.
Prices for raw materials have shot up on higher oil and
commodity prices and due to a weaker yen, which has declined
nearly 5 percent against the dollar since March. At the same
time, Japan's ageing population has meant that many sectors,
particularly service industries, are grappling with a labour
shortage that is pushing up wages.
"If we can't pass on price rises, we won't be able to
continue in business," wrote a steel company manager.
In one high-profile example, parcel delivery firm Yamato
Holdings Co Ltd 9064.T hiked home delivery prices by around 15
percent last October, the first such rise in almost three
decades, and followed up with bigger hikes for corporate
customers.
Some 540 big and medium-sized businesses were polled in the
survey, conducted by Nikkei Research on behalf of Reuters.
Around 230 firms responded to questions about pricing with their
answers kept anonymous so they can express opinions more freely.
Japanese policymakers contend the world's third largest
economy is no longer in deflation - a state of broad and
sustained declines in prices as consumers hold out for even
better deals - but they worry about the risk of a relapse.
Progress has come only after more than five years of
aggressive monetary stimulus and even so inflation remains below
1 percent. That slow pace has forced the central bank to drop a
timeframe for meeting its elusive 2 percent inflation target.
Half of firms are also still reluctant to pass on prices,
even if that means higher costs eat into profit margins.
"Once prices are hiked, things stop selling," an official at
a machinery maker wrote.
Mass-merchandise retailers have it particularly hard due to
fierce competition from e-commerce and discount stores.
Supermarket operator Aeon Co 8267.T has continued to cut
prices, most recently on 100 of its own brand everyday goods in
January by an average of 10 percent.
"It's a tug of war between raw materials costs and weak
demand in determining prices," said Masaki Kuwahara, senior
economist at Nomura Securities. "Companies have not shaken off
the deflationary mindset as their pricing power remains weak."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Breakdown of Japan Corporate Survey results urn:newsml:reuters.com:*:nL3N1SP3YM
In corporate Japan, little movement on harassment policies -
Reuters poll urn:newsml:reuters.com:*:nL3N1SU1NZ
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Tetsushi Kajimoto; Editing by Malcolm Foster and
Edwina Gibbs)
((tetsushi.kajimoto@thomsonreuters.com; +81-3-6441-1829;
Reuters Messaging:
tetsushi.kajimoto.thomsonreuters.com@reuters.net))