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MNI INSIGHT: BOJ Eyes Company Pricing Plans As Lockdowns Ease

TOKYO (MNI)

Bank of Japan officials see inflation expectations hinging on price-setting strategies by companies after Covid-19 restrictions ease with a mix of responses by sector likely, MNI understands.

Bank officials would not be surprised to see restaurants and bars raise prices to recoup losses during the state of emergency lockdowns expanded and extended this past weekend from Sept. 12 to the end of the month in 19 out of Japan's 47 prefectures, according to broadcaster NHK. Many of the outlets also face higher input costs.

However, other businesses may cut prices to gain an edge on rivals as relaxations expected with higher vaccination rates are achieved, which in turn would lower CPI and inflation expectations, see: MNI INSIGHT: BOJ Turns Focus To Q4 For Economic Rebound Signs.

TANKAN SURVEY

Bank officials are focused on the September Tankan survey due out on Oct. 1 to gauge how corporate price-setting evolves ahead of the release of the quarterly Outlook Report on Oct. 28.

There is a view that uncertainty over the strength of private demand ahead will lead some companies to wait before raising prices. The BOJ maintains the view that corporate price cuts to stimulate demand do not act as a brake on inflation expectations based on the Tankan survey results and other surveys, easing concern over a revival of deflationary mindset.

As well, bank officials see businesses are having difficulty lowering their retail prices as profits are being squeezed by the restrictions on the number of people dining together and other health measures.

RESTRICTIONS EASING

Some restrictions on dining and going out are being eased with plans to allow restaurants to serve alcohol and permit vaccinated people to travel. The government is also looking at easing restrictions on the number of people dining together if they can show proof of being vaccinated or a negative Covid-19 test result.

Economic Revitalization Minister Nishimura Yasutoshi on Sunday told NHK that over 50% of Japan's population has received two vaccine doses, with plans now to work with local governments to lift the state of emergency at the end of this month.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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