Japan, like many other markets worldwide, has felt the impacts of rising production and logistic costs in recent years, further compounded by inflationary pressures and poor currency exchange rates.
The government has found that these more of these rises in costs will be passed on to consumers this year, so has announced that a mechanism to control these hikes will be introduced.
“The Ministry of Agriculture, Forestry and Fisheries (MAFF) will support efforts to establish a mechanism to determine food prices locally, in order to ensure the smooth process of passing on cost increases to final product price hikes,” MAFF said via a formal statement.
“These cost increases will be from the processes of food production, manufacturing and distribution, as a direct result of increases in raw material costs, energy costs and more.
“This mechanism will take reasonable production costs into account in order to ensure fairness when determining product prices, and will serve to foster understanding amongst consumers when the price hikes take place [so that] all relevant parties can easily proceed with passing on these costs where necessary.”
Approximately JPY52mn (US$353,000) has been allocated as part of Japan’s FY2025 Agriculture, Forestry and Fisheries Budget to do this.
“We will first conduct a thorough survey of the cost structure and transaction prices at each stage of the agrifood supply chain in order to determine the appropriate cost indicators at each stage,” said the ministry.
“There will also be a survey on the actual transactional situations that all relevant parties take part in within the food system, including price negotiations, contract agreements, and so on to determine how cost hikes are being passed through to the final product prices.
“More research and demonstrations on cost indexes and their methods of usage within the food system will also be a priority.”
Cost indexes are tools used to balance the trade off between time-related costs and fuel costs, and can be used to estimate the impacts of rises in energy costs on areas such as transportation and logistics cost increases.
Consumer concerns
An even more concerning issue for the government at this point is the potential lashback from consumers in the event of mass price hikes, particularly when it comes to essentials such as food items, and MAFF is determined to ramp up the transparency of the entire process in order to minimise the risk of this happening.
“It is important to provide conusmers with detailed information on the practical processes that go into food production, manufacturing, and distribution, as well as the cost structure and background operations,” it said.
“This is the only way that the food industry will be able to truly foster understanding with consumers regarding rising costs, [as they want assurance that] they are not being unfairly subjected to price hikes.
“MAFF will also work on verifying any changes in purchasing behaviour related to the dissemination of such information by food businesses, [to determine] the best method to establish this understanding with consumers.”
