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Business Trends

Half of Japan's eateries plan price hikes this year

Nikkei survey shows restaurants struggling with labor and ingredient costs

The Matsuya beef bowl chain raised the price of a regular-size beef bowl to 320 yen from 290 yen last month. (Photo by Ryosuke Eguchi)   © Not selection

TOKYO -- Spending more on ingredients and increasingly scarce workers, nearly half of restaurant operators in Japan plan to raise prices this fiscal year, a Nikkei survey shows.

The poll from mid-March to late April targeted 551 companies with food service as their main business. A total of 324 responded, with 45.4% saying they will increase prices by the end of fiscal 2018.

Most of them, or 39.3%, said they plan hikes on selected menu items, while 6.1% intend to raise prices across the board.

The 45.4% is up 15.1 percentage points from the same survey a year ago. Higher ingredient costs were the most-cited reason, followed by costlier labor.

Wholesale prices of beef used in beef bowls in Japan have risen roughly 20% from last year and about 40% from two years ago on the back of demand growth in China. And with a tighter market for rice used by businesses, some companies now pay roughly 10% more than a year ago.

Matsuya Foods raised prices on certain menu items, like beef bowl and a curry dish, by 10 to 50 yen (9 to 45 cents) in early April. Chinese-restaurant operator Hiday Hidaka hiked prices of set meals by 10 to 30 yen in late April.

Rising costs are putting the brakes on earnings growth at eateries that have touted low prices.

Labor shortages are pushing up costs as well. Hourly wages in want ads for part-timers in food service averaged 986 yen in the Tokyo, Osaka and Nagoya metropolitan areas in April, up 2% on the year, according to job services provider Recruit Jobs.

The Japanese food service industry has waged intense price competition for some time. Price hikes there are thus likely to help the country overcome deflation. The survey showed that half of those looking to raise prices plan increases of less than 3%.

To prevent a drop-off in customer traffic, many restaurants will actively enhance offerings. Skylark will increase the kinds of cheese it puts in a Salisbury-steak dish at the Gusto casual eatery chain following October 2017 price hikes on selected grilled items. Royal Holdings has increased steak weight by around 10% at Royal Host restaurants.

Climbing costs prompted price hikes by many restaurants even last fiscal year. The survey found that 56.3% of respondents actually raised prices in fiscal 2017 even though just 30.3% had said they would. Many short-staffed budget eateries had to swallow price increases.

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