Japan's deflationary challenge caught in a bottle of ketchup

I am doubting the premise of this article, since food is excluded from Japan's main CPIs and thus the inflation targets. Food prices tend to be volatile and prices rises are often seasonal and not prolonged.

The writer should have opened by highlighting CPI component.

So, just like butter, ketchup will soon disappear and when it does come back, it will be double the price and limited to one.

Maybe Kagome could stop packaging their plastic ketchup bottles in unnecessary plastic bags if they want to cut costs?

So for the economic depressed, cash strapped just grab those little sachets at places like burger king etc that have them for free, stock pile those and the mustard ones too, then just think on the economising and the extra yen you'll have to spend on luxury goods hahahaha.

@JeffLee

It says the core inflation "excludes fresh food", which ketchup is not.

Economic theory predicts that consumers spend more in an inflationary environment, but that deflationary mindset can act as a brake.

This is because mainstream economic theory is 99% nonsense, dreamed up by some dude sitting at a desk. The fact that Kuroda and the BOJ persist with this idiotic quest to make things more expensive for people in order to "boost the economy" just shows he is not remotely qualified for the job. Unless of course, continuously doing stupid stuff is in fact what he is expected to do and not knowing how things actually work is a prerequisite for getting the job, then he is highly qualified.

Semantics and limited measurement indices for "cost of living" are not reflective of reality. BOJ & LDP obsession with achieving a 2% inflation through printing lots of money to weaken the Yen as a cure-all is at best naïve. The demographics of aging and declining population is best served by a very slight deflation to retain purchasing power of its citizens in an opened globalized trading system world. Current policy results in a major re-distribution of wealth (purchasing power) from consumers, savers, importers, workers to exporters, the government, shareholders of listed stocks and foreign tourists. Little extra net wealth is created.

Don't worry - they'll make it back through the exorbitant prices they charge for pasta sauce. One choice of sauce (Anna Maria) in almost every supermarket you go to here. Don't worry about giving the consumer choice!

I've seen a lot of "hidden inflation" where the food is the same price, but the sizes are shrinking.

Bottom line is Japan's in bad shape, and there's no where to go but down.

Prices will slowly start creeping up, wages won't, etc. etc..

But Kagome, like most companies, fears that consumers are not ready to pay more.

Umm, yeah you got that right. Real wages need to go up first for the majority of Japanese. I hope they at least understand this problem.

So to those who say Abenomics isn't working, here is proof his plan is working , one of his goals was inflation, so the price of ketchup going up would be inflation would it not.

Abenomics is working right before your very eyes.

This is an excellent example of how MugAbenomics will lead to the recovery of the Japanese economy, just as it did in Zimbabwe. By having to pay more for food consumers will have less to spend on manufactured goods. Therefore, profits of manufacturers will fall, leading to job losses and a virtuous circle of lower demand, falling output and rising unemployment.

So to those who say Abenomics isn't working, here is proof his plan is working , one of his goals was inflation, so the price of ketchup going up would be inflation would it not.

Abenomics is working right before your very eyes

StormR -- you are kdiding, right? Did you read anything beyond the headline, and maybe the first paragraph? Let me enlighten you on some of the things stated in the article:

Stagnant wages and public concern about the future compound the problems facing Bank of Japan Governor Haruhiko Kuroda,

“When they expect more inflation, people spend less, not more, because they expect prices to go up, but they don’t expect their incomes to go up as much,” said Richard Katz, the editor of the Oriental Economist, a Japanese economics newsletter. “That’s exactly what’s happened under Kuroda-nomics.”

A Bank of Japan survey published in January found only 7% of people believed the economy would be better a year from now. In December, Japan’s famously high savings rate turned negative for the first time, suggesting people were starting to dip into their reserves to keep up with rising living costs.

“There is a sense of real uncertainty and worry, especially among my clients in their 20s and 30s,” said Akiyama.

Kagome representatives say the 116-year-old company moved to hike prices after months of internal debate, reluctantly concluding that cost cuts alone could not offset the rapid decline in the yen.

Please enlighten us who say that Abenomics isn't working how any of these comments, from the article, not my opinion, corroborate your belief that the proof is "right before our very eyes".

@StormR Your comment made me think that maybe we could have a 'ketchup price index' referenced by the major financial news outlets from now on.......

StormR, the nonsensical term Abenomics was supposed to be about increasing consumer confidence, boosting GDP and a trail of other things, not just an inflation target. In fact the economy is a lot smaller than it was a year ago and only 7% of Japanese people believe the economy will improve in a year from now. This is Abenomics failing (predictably and miserably) in front of all eyes with no wool pulled over them because the only policy is printing money and increasing the debt.

*“When they expect more inflation, people spend less, not more, because they expect prices to go up, but they don’t expect their incomes to go up as much,”*** quote of the week, when will these morons understand that its not inflation that make people spend more its more money in there pockets. the average Taro isnt stupid, they know that the wages arnt keeping pace with inflation so why would they spend more. wages will need to keep pace or exceed the inflation rate in the Gov expects anybody to spend more. All Abe has to do is get all the big corps to give up some of the 100s billions yen theyve got stockpiled to there staff. That im thinking is going to be a lot harder than raising the consuption tax.

So catchup it is, or not?

But Kagome, like most companies, fears that consumers are not ready to pay more.

Especially when Kagome makes horrible ketchup. Gimme Heinz anyday.

Their pasta sauces (read MSG) aren't any better.

Gimme Heinz anyday agreed much thicker and more tomato flavour. next cheap but much better overall

"Prices will slowly start creeping up, wages won't, etc. etc.."

Quite likely. But the odd thing is few people blame employers, the ones who are steadfastly refusing to pay their workers a decent wage.

Instead they blame the government, which IS trying to prod the employers to get with the game. Time for a general, nationwide strike, I say. They worked in the early 20th century, and they can work now.

"... Japan’s “deflationary mindset”, a recession-era habit where saving money became a reflexive response to declining prices."

It's moronic statements like this that show Keynesian foolishness for what it is. People refrain from spending when prices rise faster than real incomes which is precisely what is happening today.

Plus, there is in fact the hidden inflation of reduced packaging at the same prices, but few consumers realize it.

"that show Keynesian foolishness for what it is."

It's actually free-market reforms that have created the mess. The reforms have allowed firms to more easily fire workers and pay them less and put them on short term contracts. That means they spend and consume less, triggering the low growth, deflation and sluggish demand.

Unexpected Health Benefits Dept: I've been looking for an excuse to unhook the IV of high fructose corn syrup (HFCS) that flows out of the ketchup bottle. I'll reach for tomatoes instead until Abenomics prices them out of my reach.

"It's actually free-market reforms that have created the mess. The reforms have allowed firms to more easily fire workers and pay them less and put them on short term contracts. That means they spend and consume less, triggering the low growth, deflation and sluggish demand."

Ha! That's akin to saying that it's raining because the ground is wet.

If one actually believes that the Japanese food industry is anything remotely resembling a "free market," I don't know what to tell you....there's a reason why every food-related company name (foreign or otherwise) ends in "Japan," and it's not due to the "free market." Every food, ingredient and beverage brought into this country or sold here must first be done under parasitical Japanese subsidiaries who...wait for it...take their cut first and foremost, then set pricing outside the market mechanism of real supply and demand, restrict or limit real competition through import quotas or other "non tariff barriers to trade" and a whole slew of other restrictions which all belie the idea that price hikes in the food industry are the "free market's" doing.

Here are the trends that will most likely become popular as a direct result of Abenomics' regressive inflationary push:

1.) 100 yen shops selling more food products. 2.) Supermarket chains introducing their own "value" (generic) brands that are inherently cheaper than name brands 3.) "Time Savings" offerings based on approaching expiration dates or the hour you buy the food (if it's perishable) 4.) More and cheaper per-unit bulk options (3 packs, 10 packs, etc.) 5.) Reduced sizes for what used to be larger portions (instead of increasing the unit price)

And it won't just be that people aren't buying the products...they'll buy LESS OFTEN and then USE LESS OF IT. Plus, they'll eat out less, and when they do, will receive limited amounts of condiments where they once used to be allowed to decide such things for themselves (sauces, mayonnaise, etc.) All of which will...you guessed it...decrease demand further and push the deflationary spiral into the foreseeable future! This is the New Japan, better get used to it, folks!

Seriously, the price of ketchup goes up a little bit, that is a small piece of inflation, cant you understand the truth ? thumbs down because you are incapable of grasping a simple concept?>

StormR,

I think the thumbs downs were dished out not because Abenomics successfully created some inflation as advertised, but because people think Abenomics is stupid in the first place.

Reflationists like those masterminding Abenomics put inflation first, and think inflation is a prerequisite for growth.

Others (like myself) think it is growth that matters and regard inflation as a consequence of it, not a prerequisite for it.

My supporting argument is that it's not true that every sector of the Japanese economy was shrinking under deflation. Growth areas were growing, and even in Japan there are start-ups about the place with young CEOs in their 20's. It's not the case that they all started-up after Abenomics. Businesses start up whenever there are profitable opportunities to be pursued. Mild deflation doesn't stop that.

But the reflationists think inflation is a prerequisite for growth, and so under Abenomics they caused import inflation through yen depreciation, which punched consumers in the stomach at the same time as a sales tax hike planned long ago was scheduled to come in, making the pain worse.

Abenomics should have been more about improving the Japanese business environment, rather than simply boosting prices through currency depreciation. Rising prices should be thought of as a consequence of a good business environment, not the other way around. I hope that the successor to Abe recognises this, or he figures it out himself.