Japanese companies are struggling to raise prices despite rising costs, as consumers remain deeply resistant to price hikes after decades of deflation. Uniqlo recently reversed a price increase on basic socks after facing backlash, while Saizeriya, a family restaurant chain, issued a public apology for raising the price of its Milanese Doria by ¥20 (S$0.16). The Bank of Japan declared in October that its 2% inflation target had been met, marking the end of 13 years of ultra-loose monetary policy. However, the shift from deflation to inflation has been challenging, particularly after global events like the Ukraine war and the US-Israel conflict with Iran disrupted supply chains and drove up costs.
Small businesses, in particular, are hesitant to raise prices for fear of losing loyal customers. Sachi, a 68-year-old ramen shop owner in Okayama, expressed guilt at the thought of increasing prices by even ¥200. “I would rather persevere myself,” she said, reflecting a common sentiment among rural businesses. Meanwhile, soaring grocery bills and higher borrowing costs due to the Bank of Japan’s interest rate hikes are squeezing household budgets, leading to reduced spending on dining out and clothing.
Economist Tsutomu Watanabe of the University of Tokyo noted that wage increases in Japan have been insufficient to offset rising costs, unlike in other G7 economies. He predicted it could take another three to four years for Japanese consumers to accept chronic inflation as a natural outcome of wage growth. “After 30 years of deflation, transitioning to a different regime inevitably takes some time,” he said.