Global inflation wave pushes up prices in Japan on everything from pasta to gasoline

The global inflation wave is seeping into the Japanese economy, with high commodity and energy prices pushing up costs of everyday goods, gasoline and power.

Japanese companies are generally reluctant to pass higher costs on to price-sensitive consumers, but more firms are apparently being forced to do so, as prices for a slew of products are on the rise.

Kikkoman Corp., a Chiba-based maker of soy sauce that hasn’t hiked its prices in about 14 years, is one of many companies who say they are out of other options.

“We have made efforts to cut manufacturing costs and streamline the logistics to absorb increased costs. But our efforts alone are not enough to absorb recent soaring material and logistics costs,” Kikkoman Corp. said in a statement.

The company plans on raising prices of its soy sauce products by 4% to 10% from Feb 16.

Kikkoman is hardly an outlier in the industry.

Tokyo-based Nippn Corp. increased prices for its pasta and pasta sauces by about 2% to 9.5% starting Feb. 1 because of swelling import costs for wheat, while Koike-ya Inc., also based in Tokyo, has bumped up potato chip prices by 6% to 11%.

Some frozen products from Maruha Nichiro Corp., Nippon Suisan Kaisha Ltd. and Ajinomoto Frozen Foods Co. have become pricier from this month with price hikes ranging from as little as 1% all the way up to 23%.

To what degree those price increases will be reflected in actual sale prices will depend on retailers’ decisions.

Meanwhile, gasoline and electricity prices are climbing as well, reflecting high import costs of crude oil, liquid natural gas and coal.

On Jan. 24, the average cost of a liter of gasoline exceeded ¥170 for the first time in more than 13 years. That prompted the industry ministry to provide subsidies to oil wholesalers to curb the price rise.

Industry minister Koichi Hagiuda even hinted on Sunday that the government might need to take an even bolder measure and enact a policy that allows for a temporary gasoline tax cut by ¥25 per liter.

The policy can be implemented if the average of regular gasoline prices remain above ¥160 for three consecutive months. But enacting it would require a legal amendment, as the policy has been frozen since 2011 in an effort to secure tax revenue for the reconstruction of the Tohoku region following the Great East Japan Earthquake.

Major opposition parties, such as the Constitutional Democratic Party of Japan, Nippon Ishin no Kai and the Democratic Party for the People, have been urging the government to introduce the tax cut. Prime Minister Fumio Kishida said on Monday that the government will not rule any available option, but the tax cut is not on the table at this point. He pointed out that such policy would cause problems, including by decreasing tax revenues and making consumers hesitant to buy gasoline before prices drop, which would impact logistics.

Following the prime minister’s remark, Hagiuda on Tuesday appeared to back track, saying the measure is not under consideration for now.

As for power prices, electricity bills of Japan’s major regional utilities in March are reportedly set to be the highest in about five years.

Those increased costs on daily necessities are stimulating the nation’s inflation rate, which has remained stubbornly low despite the Bank of Japan’s long-held goal to increase it to 2%.

The core consumer price index rose 0.5% in December from a year earlier, a fourth straight month of increases.

Many economists expect that Japan will continue to see price hikes for a while due to pressure from the global inflation wave.

That momentum will likely take a toll on households, especially those with lower income, according to a report released last week by the Mizuho Research and Technologies.

Based on the assumption that food prices, excluding volatile fresh food, and energy prices this year will rise by 3.3% and 9.1%, respectively, from last year, households with less than ¥3 million in annual income would see their food and energy costs increase ¥42,339 this year. The ratio of food and energy costs compared to their income would rise 1.8 percentage points to 40.5%.

The report says that this impact would be nearly equal to a more than 2 percentage point sales tax hike.

The report also highlighted that the burden would be lower for higher income households, with the ratio for households earning ¥10 million or more increasing 0.5 percentage point.

Although the government has implemented some measures for low-income households, the report calls for additional steps for them to cushion the impact of price hikes.

“Since low-income households have been already suffering under the coronavirus pandemic, they are facing a double whammy situation due to recent price hikes of daily necessities,” it says.