Japanese companies are struggling to raise prices despite rising costs, as consumers remain deeply resistant to inflation after decades of deflation. Uniqlo recently reversed a price hike on basic socks after public backlash, while Saizeriya apologized for increasing the price of its Milanese Doria by 20 yen ($0.13), calling it a lack of effort. The Bank of Japan declared its two-percent inflation target met last month, ending 13 years of ultra-loose monetary policy. However, businesses face an uphill battle convincing consumers to accept higher prices, especially in rural areas where small businesses rely on loyal customers.
Small business owners like Sachi, a 68-year-old ramen shop owner in Okayama, feel guilty about raising prices, even as costs soar. She has avoided a 200-yen price hike despite rising expenses, fearing it would alienate long-time customers. Saizeriya kept some items, like wine at 100 yen per glass, unchanged to maintain affordability, while Uniqlo prioritized its reputation for affordability.
Soaring grocery bills and higher interest rates are squeezing household budgets, leading to reduced spending on dining and clothing. Tokyo office worker Kazuhiko Sato noted that food prices are forcing him to rely more on imported goods. The Bank of Japan has raised interest rates to combat inflation, with borrowing costs at a 30-year high. Economist Tsutomu Watanabe of the University of Tokyo said wage hikes in Japan remain insufficient, unlike in other G7 economies where spending has held up.
Watanabe predicts it will take another three to four years for Japanese consumers to accept chronic inflation as a natural result of wage increases. He described Japan as a convalescent recovering from decades of deflation, where consumer attitudes still dictate pricing power. The transition to a new economic regime, he noted, will take time.