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Following an outbreak of the coronavirus disease (COVID-19), shoppers wearing protective face masks are pictured in a supermarket in Tokyo, Japan on March 27, 2020. REUTERS/File Photo/Issei Kato (Reuters) – TOKYO, July 15 (Reuters) – According to a Reuters poll, over two-thirds of Japanese companies are passing on higher raw material costs to customers or expect to do so as rising global commodity markets drive up import costs and pressure profit margins amid the COVID-19 pandemic. Few Japanese companies are considering lowering pricing for their core goods and services in the second half of this year, while the majority plan to raise prices or keep them the same, according to the poll. The Corporate Survey signaled a shift away from the price-setting approach observed during nearly two decades of deflation, when companies slashed prices of their goods and services in fear of losing cost-conscious clients to price hikes. The trend could be promising for Bank of Japan (BOJ) policymakers, who are dealing with stubbornly low inflation caused in part by corporations’ bearish pricing behavior and public inflation expectations. On the condition of anonymity, a manager of a pulp and paper company commented in the survey, “We are ready to negotiate with consumers to raise prices.” “At the same time, we’re reducing expenses by broadening our sourcing and purchasing sources.” The poll, which received 240 responses from 503 big and midsize non-financial organizations, found that 15% of enterprises were able to pass on raw materials costs to customers, and 46% would contemplate doing so in the future, while 39% were unable to do so. A slender majority expects to maintain prices of their main goods and services unchanged in the second half of this year, while 45 percent anticipate to raise them and only 3% expect to decrease them. In comparison, a year ago, a poll indicated that three quarters of businesses expected to keep prices the same, 17 percent planned to decrease them, and only 8% planned to raise them. Rising global commodity costs are placing downward pressure on profit for this fiscal year, according to two-thirds of companies. Wholesale prices in Japan increased 5.0 percent year over year in June, according to Bank of Japan data released on Monday, following a 5.1 percent increase in May, the sharpest rate of growth since September 2008. Rising wholesale inflation, on the other hand, is unlikely to prompt the BOJ to remove its vast monetary stimulus any time soon, given that years of printing money have failed to get inflation to the 2% target. According to the Corporate Survey, over three-quarters of non-financial firms believe the BOJ’s ultra-low interest rate policy is beneficial to their businesses. When asked how long the BOJ should sustain its present easing, only 6% said it should terminate immediately, while the rest were split: 39 percent said it should last 1-2 years, 26 percent said it should remain 3-4 years, and 29 percent said it should endure until inflation reaches 2%. In the survey, a manager of an electric machinery manufacturer said, “There is no hope of meeting the inflation objective.” “There’s a danger that unfavorable side effects that go against market principles will outweigh the benefits.” Tetsushi Kajimoto contributed reporting, and Christopher Cushing edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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