|Advertising|Jobs 転職|Shukan ST|JT Weekly|Book Club|JT Women|Study in Japan|Times Coupon|Subscribe 新聞購読申込|
|Home > Life in Japan > Media|
Sunday, Aug. 28, 2011
BIG IN JAPAN
Rising yen, falling prices, cheap beer
Beginning last Wednesday, Aug. 24, the Ito Yokado supermarket chain announced a five-day sale at 120 of its branches in the greater Tokyo area. Among the reduced-price items were U.S. beef, Australian oranges and South African pineapples.
Recently, signs reading endaka kangen sēru (yen appreciation sale) have been sprouting up all over.
Web newspaper J-cast News (Aug. 23) noted that Tower Records had also announced reduced prices on certain imported music CDs from ¥1,000 to ¥888, both in its retail outlets and online.
Prices for some 2.3 million items, ranging from handbags to alcoholic beverages to interior goods, sold via virtual shopping mall Rakuten have been lowered to reflect a more favorable rate of exchange. And Wagyu Yakiniki Gyuden, a chain of barbecue restaurants, is offering bargains on imported beef. Its "recover your vitality set" serving three to four diners, previously priced at ¥5,200, now goes for ¥3,980.
The moves resemble a replay of 1995, when the yen briefly hit ¥79 to the U.S. dollar and McDonalds slashed the price of its hamburgers from ¥220 to ¥130.
But others are saying that the endaka bargains aren't what they used to be.
Shukan Bunshun (Aug. 25) wondered whether U.S.-based fashion retailer Gap would be cutting prices thanks to the upwardly valued yen, and was told that compared with two years ago the price for raw cotton had nearly doubled — due mainly to crop failures in China. And labor costs in China, where most of the items are manufactured, have risen sharply.
"Higher procurement costs have pretty much absorbed any benefits from the higher yen," said a reporter who covers the garment trade.
One commodity where those with yen would appear to enjoy a clear advantage should be foreign travel, except that higher fuel prices have prompted airlines to tack surcharges onto the price of tickets to distant foreign destinations. Low demand, due to consumer "self restraint" following the March 11 earthquake, probably exerts as much, if not an even greater, impact on prices than exchange rates per se.
Veteran market researcher William Hall, managing director of Synovate Group operations in Japan, told The Japan Times he doesn't expect the current fall in the dollar's value to have much more impact, mainly because so many other variables affect the equation.
"Compared to when the yen previously touched under ¥80 to the dollar in 1995, we've had a continued period of deflation for almost 15 years," Hall explains. "In this intervening deflationary period, the concept of 'everyday low pricing' (EDLP) has taken hold in most daily necessity categories, and prices have been declining. American retailer Walmart acquired (Japanese department-store chain) Seiyu, and has been succeeding in introducing EDLP, which in turn is influencing major Japanese competitors. In addition, 'backroom' IT systems and supply-chain management have become much more efficient, helping to drive down prices.
"Purchases via the Internet are also growing and this is also helping to keep prices down," Hall adds.
Hall believes there is probably little room left for prices to fall further.
"From an external perspective, manufacturing costs have increased in China, as have the cost of imported crops used in foodstuffs such as wheat, corn, soy beans, and so on," he points out. "Other raw material costs such as, iron ore, bauxite, oil, etc., have also increased, making it difficult to hold down import prices.
"The strong yen is enabling manufacturers and retailers to hold down prices, with reduced costs for imported raw materials and/or for imported finished products, even if there are no signs specifically claiming this. So in that sense, we are actually having an endaka kangen without most consumers realizing it."
That said, retailers' in-house or private brands (PBs) have made increasing inroads into product sectors in recent years, and merchandisers are still finding new ways to take advantage of exchange rates.
A current example of a PB product made more affordable through disparities in exchange rates is the Topvalu brand lager beer launched by the Aeon supermarket chain on Aug. 9. Sunday Mainichi (Aug. 21-28) reported that the beer, which contains hops sourced from Germany, is brewed and canned in South Korea. The favorable exchange rate between the Japanese yen and Korean won outweighs shipping costs and import duties, enabling Aeon to sell its new brew for ¥158 per 350 ml can — ¥40 — ¥70 cheaper than domestic canned beer. This also makes Aeon lager competitive with happōshu (low-malt beverage), which resembles beer in color and appearance and has been chipping away at beer sales thanks to a lower tax rate.
A source in the beverage industry tells Sunday Mainichi that Japan's big four brewers (Asahi, Kirin, Sapporo and Suntory) will be hard-pressed to compete against such a low price; but the magazine predicts the big four won't take Aeon's challenge lying down. The weather is finally cooling down, but the brewers' battle for share of the beer market may be about to heat up.