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Wednesday, April 2, 2008
SHARP PRICE HIKES
Food to take bigger bite out of pocketbooks
By TAKAHIRO FUKADA, REIJI YOSHIDA and HIROKO NAKATA
A new wave of food price hikes hit consumers Tuesday.
Soaring worldwide grain prices have already made food more expensive in recent months, and economists think prices will keep weighing on household spending at least for the next several months.
"Surging food prices will pick up the pace most in the first half of this year," said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute Inc. "The surges in commodity prices from last summer to the start of this year were extraordinary."
On Tuesday, the government raised the price of wheat it imports and sells to domestic millers by 30 percent. This is the third recent hike, after a 1.3 percent rise in April and a 10 percent hike in October, and is expected to push up prices of bread and noodles, including pasta.
Also, milk prices rose by 3 percent to 10 percent Tuesday, marking their first rise in 30 years. Prices of soy sauce jumped for the first time in 18 years.
The hikes will continue. Those of butter and cheese will rise by around 10 percent in late April and May due to higher grain prices and distribution costs.
Although the burden on households will ease briefly in April — thanks to a ¥25 reduction per liter of gasoline as a result of the government's failure to push through a tax bill — gas prices are widely expected to go back up in May.
"This is really too much now," said Yoko Furukawa, a 39-year-old housewife shopping at a supermarket in Shinagawa Ward, Tokyo. "To be honest, I can't cut down on food spending any more than I already have. I would really like food prices at least not to go any higher."
Retiree Masaharu Hanaki, 70, said he's keeping a closer eye on food prices.
"I try not to buy bread and noodles," Hanaki said. Instead, he buys more rice than before because its price has been little affected so far.
Surging global commodity prices have a direct impact on food prices in import-dependent Japan, where food self-sufficiency stood at a mere 39 percent as of 2006 on a calorie basis.
Experts concerned that the level is the lowest among industrialized nations criticize the government's policy of letting it fall after dramatic changes in eating habits after World War II.
If food prices continue to rise at their current pace, average household spending on daily necessities would rise by ¥13,756 for this year alone. The largest portion of the increase, ¥6,403, would be for food, Nagahama of Dai-ichi Life said.
Such a burden would translate into a 0.2 percentage point fall in gross domestic product, he said.
Spending more on food and other necessities represents a blow to households particularly at a time when salaries at most companies are expected to remain flat.
Economists say people are facing sharp price hikes for the first time since the world was hit by the oil shocks of the 1970s. Nagahama said, however, the situation is worse now.
"The price increase was steeper in the 1970s than now. But salaries kept on surging," he said. "The sense of burden is stronger now because salaries have remained flat and worries about the future prevail."
Restaurants are also hurting.
"Prices of almost all ingredients are rising, including flour, mayonnaise, beef, cheese, sesame and butter," said Hideo Fukuda, of the sales department at Chibo Corp., an Osaka-based company that runs 56 "okonomiyaki" Japanese-style pancake restaurants.
The firm plans to raise the price of all okonomiyaki dishes by ¥30 to ¥50 starting in April, Fukuda said.
"We hope it won't have a bad effect" on the psychology of customers, he said.
Towa Food Service Co., a Tokyo-based firm that operates the Don'a spaghetti-house chain, has been hit particularly hard by price rises in durum semolina, the main flour for pasta.
The company, running 48 spaghetti restaurants in the Kanto region, needs about 50 tons of durum semolina a month.
The price is expected to rise by 60 percent after April, said Toshihiro Maeda, of the company's business planning department.
The company plans to raise the price of each spaghetti dish by ¥10 after April. Maeda said he hopes the small increase won't affect the appetite of consumers.
"We will see the effects from now," he said.