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Nikkei: Store brands and online sales contributing to CPI spiral

September 23, 2009
By Ken Worsley


Japan’s core consumer prices fell a record 2.2% in July, showing a fall for the fifth consecutive month. Earlier today, the Nikkei published a piece illustrating the negative effect that store brands and online sales are having on consumer prices. According to the paper:

Aeon Co. began selling a store brand 350ml soft drink for 29 yen this summer. Major discount chain operator Trial Company Inc. responded immediately, slashing the price of a comparable product to 25 yen at some of its stores. The company even lowered the price to 19 yen at stores in Aeon’s home base of Chiba Prefecture.

19 yen for 350ml soft drinks? I’ve never actually seen such a thing, but that is a remarkable difference from the usual 120 yen or so. Further pushing down consumer prices:

990 yen jeans by Fast Retailing Co.’s g.u. stores sparked a price-cutting frenzy that saw Daiei Inc. and other discount retailers sell jeans for 880-980 yen.

Just a couple of weeks ago someone tried to convince me of the virtues of $500 jeans. I wasn’t listening, but I have a hard time imagining $10 jeans to anything approaching comfortable.

Of course, Japan’s “core” consumer prices strip out fresh food but not energy, and when energy prices are stripped out July saw a 0.9% fall in “core core” CPI.

With its benchmark interest rate at 0.1%, the Bank of Japan has few weapons at its disposal to fight deflation. And when consumers expect lower prices in the future, you can bet that purchases are going to be delayed.

We will start to see the effect of dropping oil prices soon. Crude oil hit an all-time high of $147.27 a barrel in July 2008, and has lost about half of its value since then. However, oil prices have been on the rise recently, and firms may find it difficult to continue to pay higher prices for resources without cutting wages further.

Filed Under Analysis, Business, Consumer Price Index 

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Comments

One Response to “Nikkei: Store brands and online sales contributing to CPI spiral”

  1. TARA TAN KITAOKA. on February 8th, 2010 2:53 am

    IF EVERYONE WANTS ONLY TO BUY THINGS AT CHEAP PRICES.
    THEN , IT IS NORMAL IF THESE EVERYONE RECEIVE CHEAP WAGES.
    UNFORTUNATELY, JAPAN IS NOT MADE FOR CHEAP.

    UNLESS THESE EVERYONE REALIZE THIS POINT.
    SAY GOOD-BYE TO BEING A NORMAL JAPANESE OR NORMAL GAJIN.

    LIVE UNDER ANY BRIDGE OR PARK, THIS WAY IS BETTER THAN CHEAP.
    IT FREE. THINK WITH YR BRAINS NOT ONLY YR POCKET.

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