Japan’s Consumers Hunt for Bargains as Food Inflation Bites

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(Bloomberg) — Inflation in Japan is running at 4%, but Taemi Komiyama finds the cost of feeding her family is escalating much faster than that. 

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The 35-year-old housewife is paying ¥50,000 ($336) a month for food, up 25% from her budget last year. The prices of staples such as rice, eggs and cabbage have all surged in the past 12 months. She and her husband have stopped eating out to save money and she is considering rejoining the workforce to deal with higher costs. In the meantime, she’s cutting back on fresh produce. 

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“Fresh vegetables are expensive, so I try to buy frozen ones,” said Komiyama, as she shopped at the discount supermarket OK in the Asakusa neighborhood of Tokyo. 

The higher cost of food is forcing Japanese to scrimp and bargain hunt as their purchasing power drops. Last year, Japanese companies increased pay, but not been enough to offset the rise in prices. Real wages in 2024 decreased by 0.3%, according to the Ministry of Health, Labor and Welfare. And there’s little relief in sight. Prices for about 20,000 items in the food sector are predicted to rise this year, far exceeding the number of price increases last year, according to the Teikoku Databank. 

Companies are also struggling. Skylark Holdings Co., which operates the family restaurant chain “Gusto”, expects that inflation will push down operating profits by ¥11.2 billion in the current fiscal year. The company estimates that the cost of ingredients will triple to ¥5.1 billion from ¥1.7 billion. Rice in particular is expected to account for a large proportion of this, at ¥2.2 billion. 

The outcry among households and companies poses a challenge for Japanese policymakers who had wanted inflation badly for years to revive growth. Voters punished Prime Minister Shigeru Ishiba in last year’s national election over his limited price relief measures, prompting the premier to extend energy subsidies. The Bank of Japan has been far more cautious about raising interest rates than its global peers that aggressively hiked borrowing costs to cool inflation.

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Food hits a sore spot for policymakers as the nation increasingly relies on imports, whose prices are dictated by global events like the war in Ukraine, while domestic supplies are affected by factors beyond Tokyo’s control, like climate change. And the cheap yen has made imports far more expensive.

Japan’s food self-sufficiency, measured in calories, has steadily dropped to below 40% in fiscal year 2023, down from 50% about three decades ago, meaning that the nation relies on imports for the majority of its needs.

The cost of rice has risen so much that the government will sell 210,000 tons of the grain from its emergency supplies to address record prices. A standard 5-kilogram bag of rice cost ¥3,688 as of Jan. 27th, 82% more than a year ago. BOJ Governor Kazuo Ueda said in February he will keep food inflation in mind when conducting monetary policy, as it may not be temporary and could affect consumers’ inflation expectations.

Still, the Bank of Japan has been far more cautious about raising interest rates than its global peers that aggressively hiked borrowing costs to cool inflation. The central bank is focusing on a core price growth figure that doesn’t include fresh food prices and is currently much lower than overall inflation. That’s created a disconnect between policymakers and the person on the street.

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Higher food prices can reduce overall consumption when people choose to save elsewhere by cutting back on large expenses such as replacing cars and home appliances, or going on trips. This in turn becomes a drag on the economy. Pan Pacific International Holdings, which operates discount store Don Quijote, is trying to reduce prices in real terms even as the cost of purchasing goods and labor costs increase. 

“The complexity of the situation is completely different from that of the time of deflation,” said Pan Pacific’s President Naoki Yoshida at an earnings press conference in February. 

Keiko Yano, a 77-year-old pensioner who lives by herself is feeling the pinch. She works part-time to earn extra money and has only seen hourly wages go up an additional ¥10 to ¥20. She’s paying more for vegetables, eggs and electricity. She used to allow herself the luxury of a sushi meal once a month, but has now pared back to every other month. 

 “I’m not living in luxury to begin with,” said Yano. “I can’t save any more.”

—With assistance from Natsuko Katsuki, Yoshiaki Nohara and Erica Yokoyama.

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