“Prices are going crazy”: after decades of deflation, Japan is struggling to get used to inflation and its companies are hesitant to increase their prices

When Uniqlo decided to increase the price of its socks in Japan in October, the clothing giant caused an outcry that led it to immediately make a 180-degree turn. The about-face of this brand, described in this country as a “symbol of accessibility”, came after an apology from a chain of Italian-style family restaurants, Saizeriya. This had increased the price of its emblematic “Milanese Doria” gratin...

of 20 yen (11 euro cents). These reversals highlight the difficulties faced by Japanese companies in the face of rising costs. For Tsutomu Watanabe, professor of economics at the University of Tokyo, Japan is still struggling to "recover from decades of deflation" (sustainable decline in the price level of goods and services).

And this in a country where “the pricing power of companies is still largely dictated by consumers”. The Bank of Japan indicated in October that its inflation target of 2% had been achieved, after 13 years of very accommodative monetary policy. The measures unveiled in 2013 by then-Prime Minister Shinzo Abe, and continued by successive governments, were supposed to end the deflationary spiral that has plagued Japan since the mid-1990s.

It was only in 2022, with the energy shock triggered by the war in Ukraine, that inflation began to come back to life in resource-poor Japan. A shock accentuated by the war in the Middle East. 'Sorry to our customers' While in most countries companies have raised their prices accordingly, in Japan they have to confront the deeply ingrained idea that price increases are taboo.

Sachi, 68, owner of a restaurant in the Okayama region (west), is still delaying the moment when he will have to raise his prices despite costs which continue to rise. “When I imagine suddenly announcing an increase of 200 yen (1.13 euros), for example, I can't help but feel guilty and sorry towards our customers who have supported us for years,” this trader who did not give his name told AFP. “I think a lot of very small businesses are in this situation, especially in rural areas,” he says.

By deciding to reverse the increase in the price of its socks, Uniqlo sought to protect its status as a model of accessibility. As for Saizeriya, its president went so far as to promise during a press conference that he would look for "the slightest pretext to lower prices again." Food prices are becoming "insane" The chain has nevertheless maintained the prices of other items, such as wine, very cheap at 100 yen (0.56 euros) a glass, because "we want it to be enjoyed in a relaxed manner", its public relations department explained to AFP.

Machine-translated from French