March 16, 2017 5:30 am JST
BOJ watch

Logistics giant emerges as unexpected savior for central bank

Bank of Japan hopes others follow Yamato Transport and raise prices

MAKOTO NAKANISHI, Nikkei staff writer

Yamato Holdings' high-tech fulfillment center in Tokyo's Ota Ward.

TOKYO -- Surprisingly, the most talked-about company at the Bank of Japan right now is a logistic company. A planned rate hike by Yamato Transport has raised hopes that Japan's largest parcel shipper will encourage other businesses to also raise prices and help the country achieve its longtime inflation goal.

Yamato's rate increase, the first in 27 years, is a welcome move for a central bank mired in a long-running fight against deflation. To preserve policy options for the long term, the BOJ last September introduced a new policy framework that centers around controlling the yield curve. The yen has weakened since last fall amid recovering crude oil prices and growing hopes for aggressive government spending in the U.S. Consumer prices in Japan rose slightly on the year in January as prices for materials, most of which Japan imports, increased.

But the 2% inflation target is still far out of reach, in part because businesses are reluctant to raise prices. Consumption is not as strong as it could be, and corporations worry about depressing demand by transferring the growing cost of materials and labor onto their customers. In order to fully escape deflation, Japan needs to create a positive cycle where higher prices lead to greater corporate and household income, which would then trigger greater consumption.

Yamato is a household name for Japanese consumers. There are reports that Yamato has entered price negotiations with Amazon Japan and other large clients, in light of the rapid expansion of e-commerce and a growing labor shortage.

If Yamato's new prices are accepted smoothly by society, "it will be a symbolic move toward inducing a positive economic cycle," a BOJ official said. Rivals Sagawa Express and Japan Post Holdings apparently are now also considering lifting their rates for big clients.

Not everybody at the BOJ is so optimistic. One skeptic warns that companies could instead decrease the quality of their services while keeping prices flat, or that businesses transfer cost increases to each other instead of their customers. Consumers would be happy not to pay more. But "unless consumers adopt a mindset that accepts a price that properly reflect costs, it will be difficult to achieve a positive economic cycle," the official said.

The Japanese economy is in a gradual recovery. As the global economy grows, output and exports have increased, the job market has improved, and consumption is brisk. The BOJ also upgraded its economic outlook in December. The bank has high hopes for Yamato, which, whether knowingly or not, may help Japan take a big step toward inflation.

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