Industry
Update

The prices of 32,395 food products were increased in Japan in 2023, far exceeding the hikes for 25,768 items last year, private research company Teikoku Databank Ltd. announced on Nov. 30.

While the large number of food price rises this year has helped improve manufacturers’ profitability, consumers are showing signs of ”fatigue,” with sales volumes of some food products declining after their prices were increased. Meanwhile, there was some minor good news for consumers as the pace of price hikes has slowed since the summer.

Given these factors, Teikoku Databank expects that the prices of up to around 10,000 food items will be increased in 2024, but that these hikes that have continued for about two years will ”settle down” for the time being.

The average rate of price increases each time in 2023 was 6% to 14%. The trend of passing on skyrocketing raw material costs and higher labor costs due to worker shortages to retail prices continued. By category, the prices of 11,837 processed food products were raised this year. Prices also went up for 8,052 seasoning items, 6,175 alcoholic beverages and other drinks, 2,270 confectionery items, 1,533 dairy products, and 865 raw materials.

Price hikes are scheduled for 1,596 food items from January through April 2024, mainly for raw materials such as olive oil and sesame products, seasonings such as broth products and ketchup, and frozen foods. However, the pace of price increases is slowing significantly, as the figure is down about 80% from the same period in 2023.

Teikoku Databank also pointed out that there are uncertainties from April 2024 onward. The company noted that the expected price increases for supermarket food trays and other items due to the weak yen and high crude oil prices may affect food prices as well. In addition, labor costs are expected to rise further if wages are raised in annual spring labor negotiations.

Japan’s trade deficit in October shrank 70.0 percent from a year earlier to 662.5 billion yen ($4.4 billion) as imports continued to drop sharply and exports grew for the second straight month, government data showed Thursday.

It was the first red ink in two months, as exports increased 1.6 percent from a year earlier to 9.15 trillion yen, a record high for the month, but growth slowed from a 4.3 percent rise in September affected by a deceleration of the Chinese economy, according to the Finance Ministry.
Imports dropped 12.5 percent to 9.81 trillion yen, down for the seventh month, reflecting price falls for coal, liquefied natural gas and crude oil, the ministry said in a preliminary report.

Japan had a trade surplus of 915.16 billion yen with the United States, hitting a record high for the month, as exports expanded 8.4 percent on robust shipments of automobiles. Imports dropped 4.5 percent to 1.01 trillion yen.Meanwhile, Japan logged a 674.3 billion yen trade deficit with its largest trading partner China, remaining in the red for the 31st straight month.

Food exports to China tumbled 55.0 percent amid a blanket import ban on Japanese seafood after Japan started discharging treated radioactive water from the crippled Fukushima nuclear plant into the sea from August.

Japan’s overall exports to China dropped 4.0 percent to 1.65 trillion yen for the 11th consecutive monthly decline, led by sharp falls of electric components and steel, while imports declined 2.9 percent to 2.33 trillion yen.
”Looking ahead, Japan’s trade deficit is on the mend, more than halving from over 1 trillion yen earlier this year” as import costs had been trending downward recently, said Kazuma Kishikawa, an economist at Daiwa Institute of Research.

But the risk of rising import costs remains due to the recent depreciation of the yen, which was 2.6 percent weaker relative to the U.S. dollar compared with a year earlier, as well as surging oil prices last month since the outbreak of the Israel-Hamas war in the Middle East, Kishikawa said.
With the rest of Asia, including China, Japan’s trade deficit decreased by 62.5 percent to 63.53 billion yen, the first red ink in two months, as exports dropped 5.3 percent and imports shed 7.2 percent.

Japan was in the red for the 15th straight month with the European Union, registering a trade deficit of 86.63 billion yen. Imports shrank 5.6 percent and exports grew 8.9 percent.

Major Japanese companies are expected to log a record combined net profit for the fiscal first half, driven by automobile makers on the back of a weak yen, with a post-COVID recovery in activity also providing tailwinds for services and other sectors, according to a tally by a securities house.

The aggregate net profit of 819 firms that released earnings for the six months ended September by Wednesday increased 12.2 percent to 17.87 trillion yen ($118 billion) from the same period last year, according to data from SMBC Nikko Securities Inc.

The projected profit for the current fiscal year through March 2024 is also on course to hit a record high, providing a strong argument for businesses to raise wages during next year’s “shunto” spring negotiations between management and labor unions. But the figure, representing only around 57 percent of the companies that will make up the final tally, may be pulled down as major firms release earnings for the first half.

Combined net profit for manufacturers rose 11.8 percent to 9.13 trillion yen, with transportation equipment makers such as automakers seeing their net profits soar 90.7 percent to 3.56 trillion as the easing of a global chip supply crunch boosted production. Food producers also posted an 81.8 percent increase in net profit to 237.7 billion yen as they passed on higher raw material costs to consumers. Excluding financial firms, net profit among nonmanufacturers grew 11.8 percent to 8.26 trillion yen. The land and air transportation industries saw notable increases thanks to recovering travel demand and inbound tourism amid the easing of the coronavirus pandemic, with the latter surging almost nine-fold. Power and gas companies returned to the black as rate increases helped support their bottom lines. Meanwhile, shipping firms saw their profits sag 81.7 percent amid a slowdown in China’s economy, while wholesalers experienced an 18.6 percent decline. “We can expect further business expansion, particularly among manufacturers, in the coming years, but risks may emerge if the Chinese economy continues to slow or if the yen appreciates significantly,” said Hikaru Yasuda, SMBC Nikko’s chief equity strategist.