Japan plans to cut the consumption tax on food from 8% to 1%. Whether shoppers see that cut at the register is another matter, and retailers caught between the two are describing the pressure.
Prime Minister Sanae Takaichi has repeatedly said the reduction will "basically be reflected" in retail prices. She has also said that prices move for many reasons beyond the tax rate, and that a firm forecast is hard to give.
She has warned that a store which does not cut prices risks its reputation, and the government has set up a meeting of the relevant ministries and agencies to track price movements.
Retailers promise the cut
The supermarket and convenience store executives who set those prices struck the same note at their October earnings announcements.
“The tax cut will naturally be reflected in prices.”Akio Yoshida, president of Aeon, quoted by the Asahi Shimbun
“Prices will fall by the amount the consumption tax falls.”Nobuya Urashima, senior executive officer at FamilyMart, quoted by the Asahi Shimbun
“If it is the same product with the same specifications, it should fall by the tax cut.”Sadanobu Takemasu, president of Lawson, quoted by the Asahi Shimbun
The Asahi Shimbun reports that the picture changes once costs are taken into account. The article's account of that argument is cut off in the preview available, so the reasoning retailers give is not fully set out here.
A consumption tax cut only reaches households if stores pass it through. Rising costs give them a reason to hold prices where they are, which is the squeeze the executives describe.