As consumers in Japan have increasingly noticed price rises for their bills and favorite goods over the past few months, the issue of inflation has crept up the political agenda and put pressure on the government. But one organization does not seem to be expressing quite the same level of worry — the Bank of Japan.
Hit by soaring import costs, more companies are set to raise prices in the coming months, while there is no sign of commodity prices calming down and the yen’s value has continued to decline, adding to inflationary pressure.
The government said Friday that Japan’s core consumer prices excluding volatile fresh food rose 2.1% in May from a year earlier, topping the BOJ's 2% target for the second month.
Given the situation, rising inflation is a pressing issue for many consumers and households, with the matter topping voters’ concerns in polls. Nonetheless, BOJ Gov. Haruhiko Kuroda earlier this month said that Japanese households now have a “higher tolerance” of price increases.
Although Kuroda was quick to retract the comment and issued a rare apology, his remark drew flak and riled up many people. In apologizing, Kuroda said that his comment “was completely inappropriate,” since households are instead being “forced to accept price increases.”
Still, the episode highlights the tension between consumer attitudes toward the price hikes and the view taken by the BOJ, which sees the cost-push inflation as undesirable but has nonetheless left its policy unchanged, in contrast to foreign central banks that have pushed up interest rates to combat inflation.
When it comes to whether households have really become more tolerant of paying more for daily necessities, recent surveys by local media and analysis by economists suggest that is highly unlikely.
According to a phone poll conducted by the Nikkei business daily and TV Tokyo between June 17 and Sunday, 64% of respondents said they could not deal with price increases, while only 29% said they could.
Kuroda brought up the notion that households are more tolerant of inflation during his controversial speech at a Tokyo event on June 6, when he mentioned a survey conducted in April and May by University of Tokyo professor Tsutomu Watanabe.
The survey concluded that households’ tolerance had increased, since more than half of respondents, or 56%, said they would still shop at their normal supermarket even if prices went up by 10%. In the previous poll, conducted last August, the figure was 43%.
But some economists say it was premature to reach that conclusion just by looking at that question.
It may be difficult to quantitatively gauge households’ ability to tolerate price increases, but Mizuho Research & Technologies, a Tokyo-based think tank, has come up with a way to measure it using data from the BOJ’s public opinion surveys, which cover people’s perceptions of price changes.
The think tank’s report, released June 10, estimated the figure by essentially subtracting the proportion of those who answered that the price hike is problematic from the figure of those who responded that it is a favorable thing.
According to the report, the tolerance level has actually been dropping in recent months.
As the inflationary trend is expected to linger over the coming months, it is highly likely that the tolerance level will remain low, Mizuho Research & Technologies said.
Meanwhile, a report by Daiwa Securities, released Thursday, points out that households are becoming “more budget-minded,” based on its so-called luxury index.
It is calculated by comparing changes in the prices of items surveyed by the government’s consumer price index and changes in the actual prices that households paid for specific goods.
According to calculations by Daiwa Securities, the luxury index has been declining in recent months, “as concerns over inflation have dragged down consumers’ mindset.”
“To say the least, it’s difficult to say that households have ‘higher tolerance of price hikes.’”
While Japan’s level of inflation is still mild compared with other nations, the wave of price hikes does not show any sign of ceasing.
Calbee announced on Wednesday that the firm will increase the price of 157 items including potato chips by between 5% and 20% starting September, with the firm already having raised prices in January.
Supermarket giant Aeon had managed to keep the price tags of about 5,000 of its private brand items at the same level, but the firm said Tuesday that it will have to actually implement a hike for three items — mayonnaise, noodles and tissues — starting next month.
Because of soaring oil prices, electricity and gas rates are expected to climb this summer as well.
Despite growing concerns that inflation will inflict more damage to households, many economists believe that the BOJ is unlikely to make policy changes any time soon, with some predicting that the bank might only do so once the yen hits the ¥140 level against the U.S. dollar.
“Whether households are tolerant or not, more companies are being cornered into raising prices” because of higher import costs stemming from the Russia-Ukraine war and weak yen, the Mizuho Research and Technologies report said.
As a result, “households will be taking a budget-minded stance for a while.”
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