2011年2月24日 星期四

Japan Struggles With Inflation—and Deflation

FEBRUARY 24, 2011   the wall street journal





Japan could do with a little inflation. At home at least.
The nation's companies aren't alone in facing rising input prices. With the price of crude oil, food, iron ore and textiles rising globally, the cost of imports jumped 4.7% in January year-to-year, in yen terms. That was the sharpest increase since July, the central bank said.
But Japanese corporations are alone in having to deal with these rising prices in a deflationary environment at home, which remains the largest market for many of them. The Tokyo consumer price index, a lead indicator for the national index, dropped 0.2% from a year earlier in January, if volatile fresh food prices are excluded.
South Korea sanctions Deutsche Bank over market manipulation, while Japanese companies struggle with rising costs amid a deflationary domestic market. WSJ's Andrew LaVallee and Asia Heard on the Street Editor Mohammed Hadi discuss.
Behind this persistent deflation are some well-known culprits, including a shrinking population and sluggish wage growth. Also undermining domestic demand is that there are fewer full-time jobs available and poverty is on the rise. The ratio of nonpermanent and part-time workers has steadily grown from 29.4% of the labor force in 2002 to 34.3% last year, the government said Monday.
The bottom line, though, is that corporate profit margins are being squeezed. In a deflationary environment, many companies can't raise prices enough to offset the surge in input costs, if at all.
Consider tire maker Bridgestone. To try to offset a $3 billion increase in rubber and steel prices, the company expects to have raised passenger-car tire prices four times in North America in the two years through December. In Europe, it will have raised prices three times. In Japan, just once. This year it expects its operating profit margin to drop to 4.4% from 5.8% in 2010.
Other companies have yet to decide what to do. Instant-noodle maker Nissin Foods Holdings is still considering how to respond to the increased cost of wheat and palm oil. Nissin isn't prone to price rises. In 2008, the last time global food prices were rising to these levels, the company did increase the price of its noodles—for the first time in 17 years.
Not everyone's groaning over the rise in commodities prices. Mining equipment makers such asHitachi Construction Machinery will benefit from sales as commodity exporters rush to increase production while prices are high.
And for those suffering, there is one respite. The strong yen means the situation is far better than it might have been. Those January import prices would have skyrocketed by 14%, rather than only 4.7%, excluding the impact of a stronger yen.
But for Japan Inc., getting the price right is becoming more difficult.
Write to James Simms at james.simms@dowjones.com

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