Japan: why raising prices remains difficult even with inflation
Uniqlo and Saizeriya raised prices, then backed down or apologised: how decades of deflation still hold back Japanese companies even with inflation.
In Japan, companies are struggling to pass higher costs on to prices, even now that inflation, meaning the general rise in prices, has returned. The reason given is the long deflation, the prolonged fall in prices, which has shaped consumers who are reluctant to accept price increases.12 This is shown by the cases of Uniqlo, a clothing brand, and Saizeriya, a restaurant chain with an Italian flavour, which tried to adjust their price lists with embarrassing results.1
What happened at Uniqlo and Saizeriya
Uniqlo, described as the Japanese “symbol of affordability”, decided to raise the price of its basic socks. The decision provoked a negative reaction and the company immediately retraced its steps.1 According to the account, the U-turn was meant to protect the image of a low-cost brand that the local media attribute to it.1 Saizeriya added 20 yen (0.13 dollars) to the price of its Milanese-style Doria, and the increases affected almost every item on the menu. The chain issued a statement that was almost an apology, lamenting its own “lack of effort”.1 The president said at a press conference that he will look for “any excuse to lower prices again”, a remark that surprised social media users. Wine, at 100 yen a glass, was left unchanged because, the press office explained, “we want people to be able to enjoy it lightly”.1
Why raising prices is taboo in Japan
The Bank of Japan declared last month that it had reached its 2% inflation target, after 13 years of ultra-expansionary monetary policy. The measures launched in 2013 by the then prime minister Shinzo Abe were meant to end the deflation that had afflicted the country since the mid-1990s.1 Inflation only came back to life from 2022, when the war in Ukraine caused a global energy shock. Then the war by the United States and Israel against Iran and Tehran’s closure of the Strait of Hormuz reduced crude oil exports from the Middle East and pushed up companies’ costs.1 According to the account, companies in many countries have been able to raise prices, albeit amid protests, while Japanese ones have to contend with the widespread belief that price increases are taboo.1 The risk is greater for small rural businesses, which live off the loyalty of regular customers. Sachi, 68, runs a ramen restaurant in Okayama, in the west of the country, and is putting off price increases despite rising costs. She says she feels guilty towards customers who have supported her for years at the thought of suddenly announcing a 200 yen increase, and that she would rather “hold out myself”.1
Wages and interest rates: the picture for households
Japanese households have less room for other spending, from eating out to clothes, because food spending has risen. This is happening even though Labour Ministry statistics show real wages rising year on year for eight consecutive months.1 The Bank of Japan is also raising interest rates to curb inflation. Borrowing costs are at their highest level in over 30 years and, according to the account, are likely to rise further.1 Tsutomu Watanabe, professor of economics at the University of Tokyo, argues that wage increases are still largely insufficient and do not reach everyone. In the other G7 economies inflation is similar or higher, but there wages have grown enough not to hold back spending.1
What changes
Watanabe describes Japan as a “convalescent” trying to recover from decades of deflation and says that companies’ pricing power is still “dictated by consumers”. He estimates that it will take another three or four years before consumers accept inflation as a natural effect of strong wage increases.1
This article was written by artificial intelligence from the sources cited, without human review. Automatic newsroom by Redazia.
