Why raising prices in Japan amid ‘insanely high’ inflation backfires on firms

In Japan, where decades of deflation have made consumers wary of higher prices, recent efforts to raise costs have backfired on companies. Uniqlo, a clothing brand known for its affordability, faced backlash when it increased the price of basic socks, prompting the company to make an immediate reversal. Similarly, Italian-style restaurant chain Saizeriya apologized for raising the price of its signature Milanese Doria by 20 yen (US$0.13), a move seen as an admission of "lack of effort."

These incidents highlight the struggles Japanese firms face in reacting to rising costs amid a country where price increases are largely taboo. The Bank of Japan recently declared its 2 percent inflation target had been met after 13 years of ultra-loose monetary policy, but the change only came in 2022 when global events such as the Ukraine war and US-Israel conflict with Iran affected Japan's resource-poor economy.

While most companies can raise prices without much issue, Japanese businesses must navigate a cultural resistance to higher prices. Smaller, countryside businesses are particularly vulnerable to alienating loyal customers. Sachi, a ramen shop owner in Okayama region, explained her reluctance to raise prices due to the guilt and remorse she would feel towards longtime patrons.

Despite soaring food costs, Tokyo office worker Kazuhiko Sato admitted he had to rely more on imported goods because domestic products had become too expensive. The Bank of Japan is now raising interest rates to combat inflation, but wage increases have not kept pace, leaving Japanese consumers hesitant to adjust to chronic inflation as the natural result of higher wages.