Japan may face more price hikes for food, hot spring facilities, central bank says
By Leika Kihara
TOKYO, May 15 (Reuters) – Japan could face another round of broad-based price hikes over the summer as companies ranging from food makers to hot spring facilities plan to pass on soaring energy costs resulting from the Middle East conflict, the central bank said on Friday.
Abandoning their long-standing practice of keeping prices low, many service sector companies are gradually passing on higher raw material and labor costs, the Bank of Japan said in a report based on a regional business survey conducted from January to April.
Rising energy costs due to conflict in the Middle East are also prompting companies to accelerate price increases as part of business plans for the fiscal year that began in April, the report said.
Some have already decided to raise prices at a faster pace, especially in the food industry, restaurants and hot springs, the statement said.
“Others said they would decide whether to do so soon. As for the precise timeline, some said they would decide around summer or beyond,” the report said.
The report highlights the BOJ’s growing focus on inflationary pressures building up in the economy, which could strengthen the case for raising short-term interest rates.
Underscoring the cost pressure businesses face, annual wholesale inflation hit a three-year high of 4.9% in April, as the war in Iran pushed up oil and chemical prices.
Compared to when the war in Ukraine pushed up commodity prices in 2022, Japanese companies in the service sector spend less time before deciding to raise prices, the report said.
“Previously, companies had to spend a lot of time on internal discussions and negotiations with their customers. Some companies say that ‘this time the process was relatively faster because they had continued to increase prices for a while,’ he said.
(Reporting by Leika Kihara; editing by Sam Holmes)
