TOKYO (BLOOMBERG) – As winter descends on Japan, the soaring energy prices squeezing budgets around the world are starting to hurt the nation’s consumers and companies.
Bathhouse owner Atsushi Tsukui is just one of many whose business is under pressure.
The 29-year-old and his wife took over the family sento, a type of public bath common in Japan, in July. The kerosene used to heat its large, communal bathtubs in Gunma prefecture, 90km from Tokyo, has since become so expensive that they are considering substituting some of it for firewood.
“It feels completely different now,” Mr Tsukui said.
The price of kerosene – which is commonly used to heat homes outside of big cities – has shot up 24 per cent in little more than a month.
“This is the first winter season I’ve experienced since taking over the business, but times are really hard,” Mr Tsukui added.
Japan’s official inflation rate looks modest by global standards. But hidden behind the headline figure are dramatic price gains in some key items, including energy.
Fuel prices soared to a seven-year high this month and the government is expecting the tightest power supply in a decade this winter.
Oil prices are pushing up the cost of generating electricity just as the La Nina weather pattern brings colder-than-usual temperatures to North Asia.
Fuel-intensive industries such as transport and metals manufacturing have been hardest hit, but the effects are reverberating across the country.
“It’s obvious that further inflation won’t be welcome news,” said chief economist Yoshiki Shinke at Dai-ichi Life Research Institute. With wage growth stagnant, “price increases for daily necessities will be a headwind for consumer spending”.
The nation’s economic recovery from the pandemic has been comparatively slow, making it especially vulnerable to additional burdens like steeper fuel costs.
Japan’s dependence on fuel imports is also relatively higher than other developed nations, IHS Markit’s principal economist Harumi Taguchi said.
In an attempt to soften the blow, Prime Minister Fumio Kishida last Friday (Nov 19) announced support for industries such as fishing and freight, as well as subsidies for oil refiners aimed at keeping price shocks from reaching consumers.
The government has also expanded access to emergency loans for smaller enterprises and set up an information hotline.
Mr Kishida said his government is considering the release of strategic oil reserves in cooperation with countries like the United States, a move that may help to rein in prices.
China said last Thursday it would be making a release, and the Biden administration has been lobbying nations including Japan, India and South Korea to do the same.
When oil prices surged back in 2008, Japanese consumer spending dropped so sharply that the economy was already in recession when the global financial crisis hit.
While Bank of Japan Governor Haruhiko Kuroda has downplayed the recent increases as an inevitable post-pandemic rebound, inflation has taken economists in the US and elsewhere by surprise in recent weeks.
“Looking at the macro-economy as a whole, the impact of oil prices is limited,” said economist Hiroaki Muto at Sumitomo Life Insurance, adding that the effects are concentrated in industries such as transport, agriculture and fisheries.
Meanwhile, fifth-generation bathhouse owner Mr Tsukui is trying to minimise the impact on his own business.
Chopping wood and making sure the fire stays fed increases the workload to keep things running, he pointed out. For now, he is keeping extra supplies of kerosene on hand and topping them up when prices dip.
Even so, the months ahead will be tough. Bathhouse entry fees are set by the prefecture, so Mr Tsukui is unable to raise his prices to reflect increasing costs.
He is heartened by the prospect of government intervention, but still worries about what is coming next.
“There are customers who really look forward to spending the winter months in a large bathtub,” he said. “I can’t just tell customers to stop using so much water.”