Business

As costs soar, some Japanese companies do the unthinkable: raise prices

A view of the city and port skyline at sunrise from the window of a quarantine bus during the Tokyo 2020 Olympic Games in Tokyo, Japan, July 24, 2021. REUTERS/Maxim Shemetov/File Photo

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TOKYO (Reuters) – Luxury telescopes, violin bows and specialized paper are at odds with the deflationary trend that has characterized Japan for decades, with prices all soared by companies confident they can take more without losing business.

Years of stagnant prices and wages have made Japan Inc nervous about charging more for fear of alienating shoppers and losing market share. Traditionally, companies have chosen to tighten their belts in the face of rising costs. Read more

While the overall price hike remains modest, more companies are opting for increases, often led by market leaders with niche products, as rising commodity and transportation costs due to the COVID-19 pandemic and a weak yen make fuel and imports costly.

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Vixen Co Ltd, which accounts for nearly 60% of the domestic market for astronomy telescopes, plans to increase prices for its best-selling models by up to 24% from next month, to 74,800 – 169,840 yen (650 – 1500 US dollars). ).

“If costs go up and we don’t increase prices, it will have a huge impact on us, so we had to start from there,” said company spokesperson Yasuhisa Tsuzuki, adding that Vixen was also affected by higher wages in China where it is manufactured. .

So far, he said, there has been no backlash from consumers.

“Few people care when the price of an astronomy telescope goes up,” Tsuzuki said. “But a rise in the cost of milk or eggs will be reported as a big story in every single news programme.” Read more

Tokyo-based Shirakawa Sogyo Co Ltd, which has been importing and selling violins since the 1960s, this month raised the prices of some Swiss-made bows by as much as 36% to 539,000 yen.

Company President Susumu Shirakawa said that the Swiss franc’s rise against the yen added pressure on already tight profit margins.

He said it might now be an “easier time” to raise prices because costs are generally rising for everyone.

“Some of our competitors do as well.”

Cautious walks

According to official data, goods sold to other companies experience greater price increases than those sold directly to consumers.

Wholesale inflation, which reflects the prices companies charge each other for goods, hit a record 9% in November, while the core CPI rose 0.5% from a year earlier, the highest in nearly two years. Read more

Final goods prices rose only 4.6% in November even as raw material costs rose 74.6%.

Retailers, for example, generally allow food suppliers to raise prices only when the cost of raw materials jumps 20-30%, said Takao Seiken, executive director of the Center for Food Marketing Research and Information, a Tokyo-based industry think tank.

Less so, food companies are forced to resort to “deflation deflation,” Sekin said, offsetting costs by making products smaller.

Even companies that sell directly to other companies say they are wary of the size of their increases.

Nippon Paper Industries Ltd. (3863.T), which accounts for about 40% of the domestic paper market excluding paperboard, is raising the prices of some products by 5-15% in the next few months.

But it limits the increases to products in which the company is a market leader, such as “gabled” cartons used by dairy producers, according to company spokesperson Tetsuo Igawa.

“It is difficult for a company that is not a big player to be the first to raise prices,” Igawa said.

sensitive subject

Japanese companies often describe price hikes as something they do as a last resort when costs cannot be absorbed by corporate efforts – a euphemism for cost cutting.

Sangetsu Corp (8130.T) raised prices for wallpaper, blinds and flooring materials by about 15% in September, which a spokesperson said was in part on behalf of the industry, to ensure other companies continued to turn a profit.

Office stationery maker Kokuyo Co Ltd (7984.T) has raised the price of scissors, staplers and other metal items by about 8% effective Jan. 1, but has limited increases to less than one in six items in its stationery range. .

“Our internal streamlining is no longer able to address the rise in steel prices,” said spokesman Hideki Kubo.

(dollar = 115.2700 yen)

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(Kantaro Komiya reports) Additional reporting by Kentaro Sugiyama. Editing by David Dolan and Himani Sarkar

Our Standards: Thomson Reuters Trust Principles.

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