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As winter descends on Japan, the soaring energy prices squeezing budgets around the world are starting to hurt the nation’s consumers and companies. Bathhouse owner Atsushi Tsukui is just one of many whose business is under pressure.

The 29-year-old and his wife took over the family sentō, a type of public bath common in Japan, in July. The kerosene used to heat its large, communal bathtubs in Gunma Prefecture has since become so expensive that they are considering substituting some of it for firewood.

“It feels completely different now,” Tsukui said. The price of kerosene — which is commonly used to heat homes outside of big cities — has shot up 24% in little more than a month. “This is the first winter season I’ve experienced since taking over the business, but times are really hard.”

Japan’s official inflation rate looks modest by global standards. But hidden behind the headline figure are dramatic price gains in some key items, including energy. Gasoline prices soared to a seven-year high this month and the government is expecting the tightest power supply in a decade this winter. Oil prices are pushing up the cost of generating electricity just as the La Nina weather pattern brings colder-than-usual temperatures to North Asia.

Fuel-intensive industries like transport and metals manufacturing have been hardest hit, but the effects are reverberating across the country.

“It’s obvious that further inflation won’t be welcome news,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute. With wage growth stagnant, “price increases for daily necessities will be a headwind for consumer spending.”

The nation’s economic recovery from the pandemic has been comparatively slow, making it especially vulnerable to additional burdens like steeper fuel costs. Japan’s dependence on fuel imports is also “relatively higher” than other developed nations, IHS Markit’s principal economist Harumi Taguchi said.

In an attempt to soften the blow, Prime Minister Fumio Kishida on Friday announced support for industries like fishing and freight, as well as subsidies for oil refiners aimed at keeping price shocks from reaching consumers. The government has also expanded access to emergency loans for smaller enterprises and set up an information hotline.

Kishida said his government is considering the release of strategic oil reserves in cooperation with countries like the United States, a move that may help to rein in prices. China said Thursday it would be making a release, and U.S. President Joe Biden’s administration has been lobbying nations including Japan, India and South Korea to do the same.

Atsushi Tsukui turns on a jet bath at a public bathhouse in Kiryu, Gunma Precture, where he uses kerosene to heat the water. | BLOOMBERG
Atsushi Tsukui turns on a jet bath at a public bathhouse in Kiryu, Gunma Precture, where he uses kerosene to heat the water. | BLOOMBERG

When oil prices surged back in 2008, Japanese consumer spending dropped so sharply that the economy was already in recession when the global financial crisis hit. While Bank of Japan Gov. Haruhiko Kuroda has downplayed the recent increases as an inevitable post-pandemic rebound, inflation has taken economists in the U.S. and elsewhere by surprise in recent weeks.

“Looking at the macro-economy as a whole, the impact of oil prices is limited,” said Hiroaki Muto, an economist at Sumitomo Life Insurance Co., adding that the effects are concentrated in industries like transport, agriculture and fisheries.

Meanwhile, fifth-generation bathhouse owner Tsukui is trying to minimize the impact on his own business.

Chopping wood and making sure the fire stays fed increases the workload to keep things running, he points out. For now, he’s keeping extra supplies of kerosene on hand and topping them up when prices dip.

Even so, the months ahead will be tough. Bathhouse entry fees are set by the prefecture, so Tsukui can’t raise his prices to reflect increasing costs. He’s heartened by the prospect of government intervention, but still worries about what’s coming next.

“There are customers who really look forward to spending the winter months in a large bathtub,” he said. “I can’t just tell customers to stop using so much water.”

A customer at the Uenoyu public bathhouse in Kiryu, Gunma Prefecture. Soaring energy prices are weighing down on small businesses. | BLOOMBERG
A customer at the Uenoyu public bathhouse in Kiryu, Gunma Prefecture. Soaring energy prices are weighing down on small businesses. | BLOOMBERG

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