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Cost of daily items, power to rise

Prices outpace incomes as yen softens

by Jun Hongo

Staff Writer

Prices are rising before incomes are and thus consumers are feeling the pain of the yen’s depreciation driven by “Abenomics.”

First affected are imports, but price hikes for daily necessities and power are looming.

Credit for rising stocks and the yen’s continued depreciation goes to Prime Minister Shinzo Abe’s ultraloose economic policies and the Bank of Japan’s massive monetary easing declared last week.

The central bank’s aggressive easing, orchestrated by BOJ Gov. Haruhiko Kuroda, has the dollar surging near the symbolic threshold of ¥100. Finance Minister Taro Aso has called the depreciation a “process of (the yen) being corrected” after touching highs below 76 to the dollar last summer.

Earlier this month major furniture retailer Otsuka Kagu Co. announced it was raising prices on about 4,500 items “due to the trend of the yen’s depreciation since the end of last year.”

Sofas and tables imported from countries including China and Vietnam are among the items that will cost more from next Tuesday, according to the company. Danish and Italian furniture will go up by as much as 14.2 percent in May, the firm said.

“We needed to deal with the quick change of the exchange rate,” a spokeswoman at Tiffany & Co. Japan told The Japan Times. The luxury brand raised the price of its jewelry by an average of about 10 percent Wednesday.

While the decision was partly based on the rising cost of materials, the company, which cut prices last year when the yen reached historic highs, acknowledged it must take steps to cope with exchange rates.

Other imported products, including wine and foreign cars, are likely to follow the same path as the yen weakens.

It’s only a matter of time before daily items will suffer a similar fate.

Paper mills plan to raise the prices of their household products, including tissue and toilet paper, as they import ever costlier materials.

Paper manufacturers are reportedly in talks with supermarkets and wholesalers to raise the shipment prices of household products by 10-15 percent to pass on to consumers the higher costs of imports such as pulp and wood chips.

Nippon Paper Crecia Co. and Daio Paper Corp. plan to increase their product prices by 15 percent or more starting with April shipments.

The increases translate into an extra ¥10 to ¥20 in the retail price of a pack of five boxes of tissues, an official at a wholesaler said.

Oji Nepia Co. has announced plans to increase its product prices by 10-15 percent.

But the most significant price hike is likely to be for electricity, as utilities rely more on imported energy resources such as liquefied natural gas amid the nationwide reactor halts.

April saw all 10 of the major electric utilities raise prices, as did the major gas companies. The trend is likely to continue as long as the yen keeps depreciating, influencing not only importers but domestic firms as well.

Information from Jiji added

  • seetell

    WOW! Who didn’t see this coming? The price of exports goes down and the price of imports goes up. What did Abe/Kuroda expect would happen with such a sudden manipulation of the currency? And corporations are boosting bonuses but not salaries, likely with the expectation that they will have to cut labor costs again in the near future.

    Abenomics is more apt to destroy life savings and end the consumer boom in Japan than to solve any of the government-created economic and fiscal problems facing the nation. Politicians and unaccountable bureaucrats should not be allowed to control a nation’s economy.

  • orger111

    thats strange. yen manipulation never caused deflation in domestic-produced goods in the past

  • montaigne1

    Abe and Aso’s goal was to help their business buddies and themselves, what happens to regular people is, well, collateral damage. But since they are doing nothing to tackle the fundamental reasons why the Japanese economy is in the state it is in, the result in the long run will probably be more of the same with just a weaker yen.

  • PX

    So when are incomes going to rise? I don’t see this happening in the near future whatsoever. What are people going to do? Simple, they will stop consumption, demand will fall, luxury items/non-necessities will go unsold, leading us back into deflation. You can’t have it both ways–wages have to rise. I can see only exporters increasing wages from higher profits (if at all), but with the J-inc’s mentality of avoiding investments and cash hoarding, this is also unlikely. Forget importers, there is no way they can raise wages. Also, govt/npos, no way for them to increase wages.

  • Jay

    Agree with seetell. So-called Abenomics (really Keynesian economics on steroids) is resulting in rapid inflation with no commensurate rise in incomes that I can see. Nor can Japan reply on an export industry to rescue the nation’s economy, for the end consumer is either unemployed or already up to his ears in debt in Europe or the US. At least with a stronger yen, the Japanese could enjoy stable prices while wages remained flat. Now the Japanese will be spending more, yes, but only on utilities and essential goods. The endgame is not pretty.

  • montaigne1

    What Abe and Aso are doing is helping their business buddies and themselves. What happens to regular people is, well, collateral damage. Since they are not addressing the fundamental problems that have caused the Japanese economy to be in the state it is now, the long-term result will probably be more of the same with a substantially weaker yen.

  • Tony

    A increase in prices based on the increased costs seems reasonable. However when the yen strengthened against other currencies there was minimal to no price drop (that I remember seeing). I assume companies were pocketing the savings during this time. From a historical perspective the yen seems to be at an average rate so one could argue that large increases in prices are not warranted as the prices never dropped.

  • StoopyBear

    Let’s see… Japan’s economy stagnant for quite a long time…. and then some action is taken and all people complain about is supposed “Keynesian” economics. Get real.

  • Ururoa

    The elephant in the room of course is: what will China do? China must be getting seriously annoyed at both Japan and the US with this rampant money printing and fake devaluation. This whole devaluation process is going to come back and bite Japan really hard.