Ice Cream Bar Explains Inflation Expectations in Japan

Some prices in Japan haven't changed in 30 years. In the case of an ice cream bar, it was 25 years. The result is people do not expect prices to rise and when they do, it results in an ad like this one, where the entire company apologizes for the increase.

NYTimes: In Japan’s Slow Economy, Rare Price Rise Prompts Surplus of Remorse
Akagi last increased prices a quarter of a century ago, and it debated the recent rise for seven or eight years, Mr. Hagiwara said. The rising cost of raw materials finally forced Akagi’s hand, he said. Tighter logging restrictions in China, for instance, meant it had to use more expensive Russian lumber for ice cream sticks.

In stronger economic circumstances, Akagi’s price increase would not stand out. Companies in other places routinely pass on higher costs to consumers. But in Japan, businesses that face rising costs feel they have less ability to do so because wages are flat. Instead, they take a hit to their profits or cut back rather than alienate consumers.

“We don’t have any more income, but taxes are rising,” said Kazuko Ida, 65, who lives in Tokyo. As a result, she said, she is especially reluctant to spend more. “It’s one thing if luxury items are expensive, but if cheap things aren’t cheap anymore, it’s a real problem.”
But if you're the Bank of Japan, that is the solution.

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