Deflation is scary
Akagi last increased prices a quarter of a century ago, and it debated the recent rise for seven or eight years, Mr. Hagiwara said. The rising cost of raw materials finally forced Akagi’s hand, he said. Tighter logging restrictions in China, for instance, meant it had to use more expensive Russian lumber for ice cream sticks.
In stronger economic circumstances, Akagi’s price increase would not stand out. Companies in other places routinely pass on higher costs to consumers. But in Japan, businesses that face rising costs feel they have less ability to do so because wages are flat. Instead, they take a hit to their profits or cut back rather than alienate consumers.
“We don’t have any more income, but taxes are rising,” said Kazuko Ida, 65, who lives in Tokyo. As a result, she said, she is especially reluctant to spend more. “It’s one thing if luxury items are expensive, but if cheap things aren’t cheap anymore, it’s a real problem.”
Japanese policy makers have long identified deflation as enemy No. 1 for the economy. Prime Minister Shinzo Abe won power four years ago on a promise to stamp it out. The central bank has been flooding financial markets with cheap money, and it has gone so far as to cut its benchmark interest rate below zero, a policy that has been tried in only a few other developed countries.
