The rising cost of everyday items in Japan is making many consumers anxious amid stagnant wage growth. But chocolates may be an exception as Valentine's Day approaches.
Like many other food items, chocolates are pricier this year, with ingredients for producing them such as cacao and sugar more expensive amid the global inflationary trend.
An individual piece of chocolate costs about 7 percent more than it would have a year earlier, according to a survey conducted by a research institute. For people craving chocolate from luxurious overseas brands, the weaker Japanese yen is making them even more costly.
Demand for chocolate grows in February in Japan, when many women buy them as gifts for someone they love, their crush, or friends for Valentine's Day. Average household spending on chocolates for the month is usually higher, reaching around 1,200 yen ($9) for the past two years even amid the COVID-19 pandemic, roughly double the figure in other months, according to government data.
A growing number of companies are hiking prices to pass on the increasing production costs. Japan's consumer prices jumped 4.0 percent in December from a year earlier, the fastest pace in four decades, putting market pressure on the Bank of Japan to do something about it.
So far, the central bank has appeared to be in no rush to take action, as they argue the recent trend of rising prices is primarily due to the higher prices of energy, raw materials and other imported goods, a trend the bank believes will not last long.
The yen's precipitous drop of late, especially against the U.S. dollar, has been driving import prices higher. Imported chocolate brands saw an average increase of 33 yen a piece from a year earlier, roughly double the gain for domestic brands, according to research firm Teikoku Databank Ltd.
There is concern that higher prices could scare off consumers and put a damper on their spending, a key driver of the economy that has been recovering from the COVID-19 pandemic fallout. For now, however, people are eager to catch up on things they have missed out on during the pandemic years, going on trips, dining out with friends and enjoying entertainment services.
On top of that, increased spending on "special occasions" like Valentine's Day is also evident, economists say.
"The number of COVID-19 cases has been declining and people have been going outside. We are busy coping with extremely strong demand for items related to Valentine's Day," said a worker at a supermarket.
When economists at Daiwa Securities analyzed a recent government survey targeted at people with jobs that are sensitive to current economic trends in Japan, they found more comments about businesses linked to Valentine's Day in January than before.
Daiwa's "Valentine's" index, which looks at how many people left positive comments on the survey and how they view current economic conditions, hit its highest level in recent years, reflecting increased business activity for the special day, while the overall diffusion index pointed to the worsening economic situation.
"Demand for services is expected to continue for some time and people appear willing to spend on special occasions," said Kota Suzuki, an economist at Daiwa. "But real income is not rising, meaning what people currently have is more limited, so they will continue to opt for cheaper everyday items and refrain from buying durables."
Government data due out Tuesday is expected to show that Japan's economy rebounded in the last quarter of 2022 from an unexpected contraction in the July-September period. Private consumption, which accounts for more than half of the economy, likely grew 0.58 percent for the three months ended December, with an average 0.36 percent increase forecast for the January-March quarter, according to a survey conducted by the Japan Center for Economic Research.
Still, it is an open question as to how the phenomenon, something economists call "special occasion spending," will turn out.
The unique tradition of mostly women giving chocolates to men, at times out of "obligation," may also be changing. In a recent survey, less than 10 percent of women said they will prepare "obligatory" chocolates for work colleagues and others, while about 70 percent of female respondents aged between 15 and 19 are planning to hand out chocolates to friends, according to marketing research firm Intage Inc., which surveyed around 2,600 men and women.
The percentage of women planning to spend more money on chocolates and that of those saying they are not is about the same in the survey, citing rising costs as a reason.
Economists agree that more robust wage growth is a must for Japan to see stronger consumer demand. So-called "excess" savings that have accumulated during the pandemic period have reached around 64 trillion yen, but this has done little to lift consumer spending, according to the Japanese government.
"Worries about the future run deep, so there is a strong desire to save rather than spend. Excess savings are there to serve as a buffer, rather than a booster to consumption," Daiwa's Suzuki said.