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Benefit of strong yen being passed on to customers. Nitori, Seiyu sharply cutting prices

3, 03. 2009

   With the yen getting stronger, some companies are passing on the benefit to customers. Nitori Co. reduced the prices of 300 items of furniture, curtain, carpet and other merchandises by an average of 17% from Feb. 21, 2009. The Seiyu Co. is also cutting the prices by 10-40% on 400 home interior items and by about 24% for imported perishable foodstuffs. The trend of price decline is likely to expand in and after March 2009.

Nitori reducing prices by average 20% on 1,300 items

   The major furniture dealer Nitori, based in Sapporo, cut down the prices of a total of 300 items, including 60 items of furniture and 240 items of such goods as curtain and carpet, by an average of 17%. A sofa that used to be sold for 39,900 yen is now priced at 29,900 yen, while the price of a curtain is cut down from 39,900 yen to 29,900 yen.

   Nitori had previously conducted price reductions on three occasions since May 2008. Combined with the latest price cut, the company has reduced prices by an average of 20% for accumulated 1,300 different items. This accounts for 16% of a total of 8,000 items it sells.

   Explaining how it was possible to reduce the prices, the official in charge of public relations at Nitori said:

"We avoid the use of in-between firms and, by so-doing, cost for transportation and importing can be sliced, and the strong yen also helps price decreases."

   The sales at the company's shops in the period between March and May 2008 went down from the corresponding period of the previous year. After the prices were cut down in June 2008, the sales increased over the previous year. The sales in November registered 113.4% of a year earlier.

   The major supermarket The Seiyu has reduced the prices of 1,400 items of home interior goods, home general goods and appliances by 10-40% since January 2009. Additionally, the company also cut down the prices of imported perishable foodstuffs to pass on the benefit of the strong yen to customers. The sticker price of all types of pork imported from the United States was reduced from 127 yen to 97 yen per 100 grams. The price cut is about 24%. The price of the grapefruits imported from the United States was cut down from 97 yen to 89 yen each.Medium-sized shrimps imported from India and Indonesia that were sold at 498 yen are now sold for 397 yen per 16, while the price of the large-size black tiger prawns were reduced from 598 yen to 498 yen per dozen.

Commodity prices likely to nosedive dramatically after March

   Prides decline is spreading also over the restaurant business. McDonald's have been serving low-priced lunches since Jan. 19 on weekdays in the Kanto region. This service was expanded to other regions across the country except the Kinki region to a total of about 3,000 joints. The service centers on the "value set" combos that include the French fries and a drink. Under this special offer, the prices are reduced from the ordinary 610-650 yen to 490 yen for the "Shrimp File-o Value Set," from 580-620 yen to 490 yen for the "Chicken File-o Value Set" and from 470-490 yen to 390 yen for the "Cheeseburger Value Set."

   The wining-restaurant chain Watami has cut down on the prices for sour and other alcoholic drinks since Feb. 9, 2009. The prices for draft beer were reduced by 13-17%.

   These price reductions are not directly related to the yen's appreciation. But they are certain to reflect the price drops for the materials stemming from the rising exchange value of the yen.

   The short-term forecast group of the Japan Economic Center said:

"Commodity prices have been going down gradually since January, and we believe they will nosedive dramatically after March. They will drop further than those at the time of deflation in 2000. The prices went up because of higher costs for raw materials in 2008, and they are likely to change the trend downward."

   In the meantime, voices are heard from the consumers that they hope the decline of price decline should involve other varieties of goods.

   Naoko Ogata, researcher at the research group of the Japan Research Institute said:

"The speed (of passing on the benefit of the strong yen to customers) differs depending on the types of goods. In case of gasoline, the prices have already gone down as the prices of crude oil can be quickly reflected. But it takes six months for the electricity and city gas rates to factor in the fuel prices.In case of manufactured goods, the prices can not be reduced until the materials which have already bought while their prices were high are used up. For these reasons, the prices of the goods which need less processing can be reduced faster."

   It was also pointed out:

"The prices of a wide variety of goods were raised during 2008. But there are some firms which could not raise (the prices) for fear that the consumers might shun their products if their prices were raised at the time of bad business condition. The same condition may still persist."

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