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As global costs soar, Japan’s ‘shrinkflation’ gets harder to swallow -Breaking

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© Reuters. FILE PHOTO – A woman buys fruit outside of a Tokyo vegetable shop at Ameyoko, Tokyo, Japan on January 27, 2016. REUTERS/Yuya Shino/File Photo/File Photo

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Kantaro Koiya and Daniel Leussink

TOKYO (Reuters – It was a chocolate cookie that made Masayuki Icha, a self-described penny-pincher, one of Japan’s most meticulous chroniclers for “shrinkflation.”

After he had been avoiding Chocoliere tartlets for over a decade, Bourbon Corp cut the packages in size. The newspaper delivery man turned part-time stock trader saw the same thing happen two years ago and decided to take action.

Iwasa (45 years old) said that she was upset at the shrinking prices. His website http://www.neage.jp, which documents price increases, contains secretive information about price rises.

He currently tracks 400 items and services prices, from washing powder to tickets at Tokyo Disneyland. He devotes a lot of time to shrinkflation. When a product becomes smaller while the price remains constant, it is called shrinkflation.

Iwasa stated that Japan’s deflation has made it difficult for people to increase prices. Shrinkflation, therefore, is considered a last resort. It’s sneaky, and bothers me.

Although the Japanese practice of this is not unusual, it does have its advantages. Mondelez International Inc (NASDAQ:) The global protest over the reduction of the Toblerone chocolate bars in 2016 was sparked by a legacy of decades of deflation.

Companies have become wary of raising prices to avoid losing clients, as wages and consumer prices have barely changed over the past two decades.

This is a problem for policymakers who want higher prices as a key component of a healthy spending cycle and economic growth.

Japan Inc could be at the tipping point. Due to rising raw material costs, a weak Japanese yen, and increased fuel prices, companies are paying more for coffee beans, beef, and diesel.

Only 14% have yet passed on increased costs to Japanese customers. But, 40% said they intend to, according to a Reuters poll.

However, food businesses are not willing to pay more, according to the survey. They fear losing shoppers.

Tsutomu Watanabe is an economist at the University of Tokyo. He stated that as raw material prices rise, manufacturers of food would want to increase their prices, but this can be difficult.

Watanabe stated that many companies would not accept price hikes, as they did during the 2008 commodities boom and 2013-2014, when the yen was weakening sharply. Shrinkflation is one way to preserve margins.

BACKLASH FOR CONSUMERS

Bourbon reduced the Chocoliere biscuits per 150 yen ($1.30/packet) to 14 in 2008 due to higher prices, Iwasa’s site reveals. Iwasa uses announcements from companies, web archives, and other information to keep track of price trends.

The packets were now 110.6g instead of 122.5g. Bourbon cut just under 1 gram off the confections.

Requests for comments were not answered by the company.

Kameda Seika Co came under fire after it reduced its packages of “kaki Pi” peanut cracker and peanut blend by 5% to just 190 grams.

According to Reuters, a spokesperson for Kameda said that the reduction in size occurred because Kameda couldn’t offset rising transport and commodity costs by tightening their belts elsewhere.

Calbee Inc stated that it would reduce some potato chips and Jagarico potato sticks’ contents by approximately 5% starting next month. Additionally, the company will increase prices by as much as 10% on more than one dozen potato chip products.

Satoshi Yoshida, spokesperson for the snack manufacturer said that the decrease in sales was more popular than price increases.

He stated that customers may recall a negative experience where they were deceived, and will likely have bad memories.

Lotte Co was criticized when it declared a renewal for its Bacchus chocolates Japan in last year without noting that the package had been reduced to 10 pieces from 12. According to online posts,

Yuichi Nitanai, spokesperson for the company, confirmed that there was a reduction in prices but refused to elaborate.

Officials at the Ministry of Internal Affairs said that the government’s consumer price index includes smaller package sizes.

The impact of shrinkflation might not have been fully captured in the data, however, because the government index is more likely to be based on well-known brands. However, shrinkflation tends towards smaller, less known businesses, according to Watanabe, University of Tokyo.

He said that top firms are proud and won’t be seen performing something unattractive like shrinkflation.

($1 = 113.3900 yen)

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