By Tetsushi Kajimoto and Leika Kihara
TOKYO (Reuters) – Japanese consumers may finally shed decades of thrift mentality at a time when retailers were afraid to raise prices. Spend more money on commodities and pave the way for the central bank to eventually unwind its massive monetary stimulus.
The world’s third-largest economy is seeing early signs of demand-driven inflation as the number of hotels, restaurants and hotels increases. Retailers are now charging more for services without losing consumers who are willing to pay more for higher wages.
At the Ougatou hotel in northern Japan, the fastest-selling room was a luxury suite with a private bathroom overlooking the surrounding mountains – although standard rooms cost double and have increased from May 5%.
“Thankfully, the price increase has not had a big impact on our business and the rooms are full and have been packed throughout November,” Hiroki Wakita, a staff member at the hotel, told Reuters. society.
French restaurant Robuchon in Tokyo is now charging as much as $156 per person despite raising the price of set menu dinners with a waiting list of two months.
Ukai, a traditional Japanese restaurant near the landmark Tokyo Tower, now charges up to
, The Japanese Yen ($156) package has increased compared to last November 22%.
“There is no doubt that despite the price increase, the increase in wages and bonuses is one of the factors that drive customers to come and dine with us,” said Ukai manager Yuka Hoshino. “Our customers no longer see price increases as anything special.”
Price increases broadened from goods to services, highlighting a turning point in Japan’s economy as stagnant wage and service price growth kept inflation in check For more than twenty years.
This has also caught the attention of the Bank of Japan (BOJ), which is changing its view that recent cost-driven inflation will be temporary.
The Bank of Japan is starting to dismiss signs that inflation is increasingly being driven by improving consumer demand, which if sustained could give new Governor Kazuo Ueda a reason to abandon his predecessor’s massive monetary stimulus.
“Consumption and wages are rising. Sentiment is clearly changing,” said a source familiar with the BOJ’s thinking.
“Japan is seeing early signs of achieving inflation and rising wages,” said another source, a view echoed by two other sources. “The next key question is whether this is going to be a trend.”
Different types of inflation
Japanese wages have barely risen in the past decade as ingrained expectations
However, those views changed after companies began to pass on a surge in raw material costs that sent inflation above the Bank of Japan’s 2% target and stayed there
According to data, service prices rose 1.7% year-on-year in May, of which catering costs rose 7.1% and leisure costs rose 3.1%.
A survey showed that 86 dining out chains in April – of the total 56.4% – Prices rose at least once since 2022, Tokyo Shoko Research said, citing rising raw material and labor costs.
Workers’ wages also started to rise. After agreeing to the fastest wage hikes in three decades this year, companies will remain under pressure to keep raising wages next year amid a tight job market, analysts said.
A survey in April showed that 86.2% of hotels and 70% of restaurants complained about labor shortages, up from vs. one year ago, .3% and 000.1%, Imperial Database
The prospect of rising wages is cheering consumers.
Akihito Sato said the food company he works for has raised wages this year. “I bought a new set of golf clubs. It was a big treat for myself,” he told Reuters as he strolled through Ginza’s upscale shopping district.
“I do feel the positive effects of the wage increase are spreading. My dad got a raise this year and bought a new car for himself and another for my brother,” year old student himself is expected to raise salary.
The Bank of Japan is changing the tone on inflation drivers and how they see progress toward sustainable 2% inflation.
Deputy Governor Ryozo Himino said, Recent price increases have been stronger than previously expected and inflation expectations are rising – and the cost of imports is not the only reason.
At the BOJ’s June meeting, some board members saw an upside risk to inflation, with one member saying that price and wage increases were “increasingly integrated into corporate behavior” and their A summary of comments is displayed.
“It’s clear that as more and more services firms raise prices, the nature of inflation is starting to change, something we haven’t seen until the past few months,” said the former Bank of Japan Economist Seisaku Kameda said.
“The increase in service prices is widening and may exceed the BoJ’s expectations. Japan may be on the verge of the wage inflation cycle that the central bank wants to achieve.”
(1 USD=86. Yen)