Companies have begun lowering prices for certain goods imported from Europe due to the recent historic drop of the euro against the yen.
The euro has fallen nearly 10 per cent against the Japanese currency during the last three months, meaning the prices of goods purchased with the yen can be lowered to reflect exchange rates.
However, a number of factors including a surge in the price of raw materials, are pushing up the cost of other European items, making it unlikely that lower-priced European goods will boost consumer spending overall.
Department stores slash prices
The Matsuzakaya Ueno department store in Taito Ward, Tokyo, began a sale Wednesday, cutting prices of European wine and food items by 20 per cent to 50 per cent to pass the benefits of the yen's appreciation against the euro on to customers.
In Europe, many of these goods have had their prices rise, partly due to the increasing cost of raw materials. But the department store procured goods that have been less affected by price hikes.
"Goods such as Italian pasta and olive oil sold well (from the first day of the sale)," a department store spokesman said.
Sogo & Seibu Co. stores will begin a sale Friday in which prices of 20 to 30 varieties of wine will be cut by up to 30 per cent. In late January, Takashimaya Co. stores will reduce prices of European-made spring and summer clothes by about 10 per cent from the same period last year. Otsuka Kagu Ltd., a major chain of furniture retailers, on January 12 cut the prices of about 300 items in six brands imported from Germany, Italy and other European countries from 3.8 per cent to 22.1 per cent. Company officials say they received many inquiries about the price cuts that coincided with the period when many people buy new furniture, ahead of the start of the new fiscal year.
Luxury good prices unchanged
But many companies are not planning to cut prices, particularly retailers of luxury bags, jewelry and high-end cosmetics.
This is partly because the prices of raw materials, such as gold and leather, have surged due to increasing demand in emerging economies. Transportation costs have also risen.
Also, a department store official said, "Price cuts may damage brand images (of luxury goods)."
European automakers have so far not indicated that they will cut prices, partly because payments of imported cars are settled in yen.
But Volkswagen Group Japan is offering free repair services on its automobiles to pass profits from the favorable exchange rates to consumers.
Supermarket store chains have not made any noticeable move to cut prices. They have already been engaging in a price-cutting war due to the nation's deflationary trend and have procured only a limited range of goods directly from Europe.
Travel companies are hoping the fall in the euro's value makes travel packages to Europe more enticing, but in most instances tour fees have not fallen.
This is largely because the fuel surcharge for round trip flights to Europe is now 50,000 yen (US$650), about a 2.5-fold increase from the same period last year.
An official at a major travel agency said, "(High flight prices) have offset the falls in hotel charges and other fees."
"Due to already sluggish consumption, the price cuts this time are limited. Therefore, their ability to stimulate overall consumer spending is small," said Hidehiko Aoki, an analyst at Merrill Lynch Japan Securities Co.
