Japan faces soaring price hikes as yen depreciates - Reports

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Japanese Nikkei newspaper reported on Wednesday that 60% of food products in Japan have been affected by soaring inflation as a result of rising materials costs and the yen's rapid depreciation.

The Teikoku Databank Ltd. survey found that of the 1,701 firms surveyed last month, 68.5% plan to implement price hike plans. As many as 102 Japanese food producers were intending to raise prices or have already done so for 15,000 types of products. It is also reported that prices for 60 food products in 470 supermarkets increased across the country, the most affected being seed oil (by 12%), and mayonnaise (by 15%), with another 12 categories rising by 5%, according to the database.

The survey also indicates a decrease in the average receipt amount for 20 out of 37 food products, which account for 54% of the total number of food products affected by the growing prices due to the fact that salaries are not being indexed relative to the change in prices.

Some Japanese companies opted to decrease the size of their product to avoid changing prices, but if raw material costs continue to rise, price hikes will be inevitable in the coming months, according to a survey published by the think tank in May.

As the consumer price index, which excludes fresh food and energy, rose to 1.9% in May compared to the previous year, Japan's currency depreciation has ensued strenuous obstacles for national companies as it affects import prices and production costs. 

While other countries like the US and UK are currently facing arguably more serious cost of living problems, soaring commodity prices, fuelled by the war in Ukraine, pushed Japan’s consumer inflation above the Bank of Japan’s 2% target for the first time in seven years.

When energy prices rise and the supply chain gets disrupted, the cost of production for all commodities increases. The impact of the COVID-19 pandemic was detrimental to all, causing some cities and trade centers to close, as well as disrupting supplies, shipments, and production. When companies lack a production resource, it causes delays in the delivery of stocks to markets thus leading to a scarcity in food products, hence an increase in prices. 

With energy prices, the situation becomes far more apparent given that energy is a necessary commodity for all forms of production. When energy prices rise, so will the cost of wages and machines. With the high usage of electricity comes high levels of production, and vice versa.

Japan is no exception as it is experiencing higher energy prices, but perhaps going through fewer disruptions and fewer supplies because much of the consumption bundle is locally produced.