By Leika Kihara
TOKYO, May 15 (Reuters) – Japan may face another round of broad-based price increases around summer, as firms ranging from food makers to hot spring facilities consider passing on soaring energy costs from the Middle East conflict, the central bank said on Friday.
Shedding their long-held practice of keeping prices low, many service-sector firms are steadily passing on rising raw material and labour costs, the Bank of Japan said in a report based on a survey of regional firms conducted from January to April.
Rising energy costs from the Middle East conflict are also prodding firms to accelerate price increases under business plans for the fiscal year that began in April, the report said.
Some have already decided to raise prices at a faster pace including those in the food industry, restaurants and hot spring facilities, it said.
“Others said they will decide whether to do so soon. As for the specific timing, some said they would decide around summer or beyond,” the report said.
The report underscores the BOJ’s growing attention to inflationary pressures building in the economy that could add to the case for a near-term interest rate hike.
Highlighting the cost pressure companies face, annual wholesale inflation hit a three-year high of 4.9% in April as the Iran war boosted petroleum and chemical goods prices.
Compared to when the Ukraine war pushed up raw material prices in 2022, Japanese service-sector firms are spending less time before deciding to raise prices, the report said.
“Previously, companies had to spend significant time for internal discussions and negotiations with their clients. Some firms say that this time, the process was relatively quicker as they had continued to raise prices for some time,” it said.
(Reporting by Leika Kihara; Editing by Sam Holmes)
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