Retailers in Japan to cut pre-tax prices

TOKYO (The Japan News/ANN) – Some retailers and food service operators are cutting the pre-tax prices of products, keeping prices unchanged even after the consumption tax hike in October and thereby trying to continue attracting customers.

The move is good for consumers but may compel companies to engage in a gruelling war of price competition. Ryohin Keikaku Co, which runs Muji Stores, has displayed posters in its stores since mid-September saying, “Our prices won’t change after October 1.”

It will reduce its pre-tax prices in order to make the tax-inclusive price at 10 per cent tax equal to the current price with eight per cent.

The variety store has cut costs by cooperating with suppliers to consolidate factories and streamline production processes.

The company took the same approach when the consumption tax rate was raised from five per cent to eight per cent in April 2014.

A poster at a Muji store in Ginza, Tokyo, announces that prices will stay the same from October. PHOTO: THE JAPAN NEWS/ANN

As a result, it saved itself the trouble of changing price tags, the company said. Fukuoka-based leading drugstore chain Cosmos Pharmaceutical Corp, which runs about 1,000 outlets nationwide, mainly in western Japan, will keep its tax-inclusive prices unchanged for pharmaceuticals, daily necessities and other items. Those products account for between 30 per cent and 40 per cent of its sales in monetary terms.

“We may temporarily lose profits but we believe that we will gain the trust of consumers who will become more budget-minded,” a spokesperson said. The food-service industry — where a reduced consumption tax rate of eight per cent will be applied to takeout meals — are either keeping prices unchanged or reflecting the tax increase, depending on the product.

Kentucky Fried Chicken Japan Ltd announced on September 19 that it would keep the tax-inclusive prices of its mainstay products the same after the tax hike, such as that of Original Recipe Chicken.

McDonald’s Company (Japan) Ltd will keep its tax-inclusive prices unchanged for 70 per cent of its products, including the Big Mac and five-piece Chicken McNuggets. Companies are concerned that consumers will hold back on spending due to the tax increase.