On Wednesday night, clerks at convenience and department stores nationwide will be busy ripping the price tags off their products and introducing new ones.
Under a new rule that takes effect Thursday, all merchandise must carry a price tag showing the total amount to be paid — including the 5 percent consumption tax.
At present, the price tags on the vast majority of goods do not include the tax, with stores charging the 5 percent levy at the cash register.
In theory, the revision will not affect the total paid by shoppers. Tax authorities even argue that the move is in the interests of consumers, ensuring that “what you see is what you pay.”
But retailers are concerned that, in addition to the practical inconveniences the new system will cause, it may also hurt sales.
Consumer groups have meanwhile balked at the change, claiming the new rule is a well-designed ploy paving the way for the government to raise the consumption tax.
For supermarkets and other stores, consumption tax-inclusive price tags will “mess up” the appearance of figures designed to attract shoppers.
At these stores, the prices of many daily commodities — usually featuring the figures 99 or 89 — are aimed at making shoppers feel they are saving money.
Aeon Co., which runs the Jusco and Max Valu supermarket chains, said it marked down 1,320 Top Valu brand goods on March 25, looking to maintain its old prices even after the change takes effect.
The price of a box of cornflakes, for example, was cut from 198 yen to 189 yen, an effective 5 percent discount.
“We wanted to maintain the prices our customers are used to paying,” Aeon spokeswoman Hiroko Sugimoto said.
The Uniqlo casual clothing chain has also marked down all of its goods to maintain price-competitiveness, although these reductions have not been as drastic as those of Aeon.
“Displayed prices are very important. The perception of shoppers is all that matters,” Genichi Tamatsuka, president and chief operating officer of Fast Retailing Co., which runs the Uniqlo chain, told a recent news conference.
“Actually, the impact of the tax-inclusive price display on the consumer price index is considered neutral,” Ryutaro Kono, chief economist at BNP Paribas Securities (Japan) Ltd., wrote in a recent report, noting that not all stores are cutting their prices.
For some businesses, the new rule is too costly to contemplate.
The Japan Book Publishers Association, for instance, was one of its most vocal opponents. The prices of books are bar-coded and printed directly on the back cover, and there is a vast inventory of products both at publishers’ warehouses and on bookstore shelves.
One estimate shows, for example, that at least 800 million books bearing old price tags have been printed but not yet sold.
These factors make it extremely costly to change price displays, association official Kiichi Tachibana said.
In fact, publishers have already been burned by pricing changes. When the consumption tax was introduced 15 years ago, books were among the few goods to carry tax-inclusive price tags.
Back then, the association’s 500 member publishers spent about six months changing their book covers at an average cost of 36 million yen per publisher.
“For that operation, bookstore shelves were stripped almost empty at one time,” Tachibana said.
But in 1997, the government raised the consumption tax from 3 percent to 5 percent, and the publishers snapped, going back to before-tax tags so they would not be hurt by future tax hikes.
It is no wonder, then, that the publishers vehemently opposed the new rule, and in the end, tax authorities decided to allow them to insert between the pages of books a slip that bears tax-inclusive prices.
Some businesses also feared the new rule would result in more than just price-tag changes.
“Our biggest concern was what will happen to our 100 yen shops,” said Norio Kosugiyama, marketing director of Can Do Co., which runs some 600 stores that sell a jumble of products at a before-tax price of 100 yen.
If all prices are to include the consumption tax, would this mean “100 yen shops” must be renamed “105 yen shops?”
Kosugiyama said this is unthinkable. Given the proven psychological impact of the 100 yen price tag on consumers, 100 yen shops have attained a brand quality.
“People come when they see the 100 yen signs, not our company name, which many probably would not even recognize,” he said.
To his relief, tax authorities stated that, as the 100-yen shop title should be treated as a trade name, it does not violate the new rule.
Yet some still wonder why the government plans to enforce this new policy, 15 years after the consumption tax was introduced?
Hiroko Mizuhara, secretary general of the Consumers Union of Japan, said consumers were not demanding tax-inclusive prices.
“Consumers don’t feel any real inconvenience with the current system,” she said.
Mizuhara claimed the change is designed to pave the way for future tax hikes — by “burying the tax in prices.”
“Tax-inclusive prices make it hard for consumers to know how much they are paying for tax,” she said.
The Finance Ministry dismissed these accusations, stating that the introduction of tax-inclusive prices had been discussed for years.
In fact, tax-inclusive pricing was meant to accompany the introduction of the consumption tax in 1989.
Yet there was widespread consumer anxiety that predatory retailers intent on chalking up huge gains would secretly hike prices in the name of the tax.
Authorities subsequently allowed stores to display the tax-excluded prices to assuage suspicious shoppers.
“This is for the benefit of consumers. We are aware that the change entails costs, but we want (businesses) to realize its purpose,” Vice Finance Minister Masakazu Hayashi told a recent news conference.