The price is right, but sometimes difficult to read

April 27th, 2014 by Philip Brasor & Masako Tsubuku

Do the right thing: this supermarket tells customers that all prices indicated include the consumption tax

A quick survey by the Ministry of Internal Affairs and Communiciations has revealed that the average price of goods and services, excluding “fresh produce,” since the consumption tax hike went into effect April 1 has increased 2.7 percent, which sounds about right since the hike itself was 3 percent. When the consumer price index is announced next month, the ministry projects that it will be 3 percent higher than it was a year ago, so everything is going as planned.

Of course, that’s the word from on high. Here in the real world, meaning in the stores where we all shop, the situation isn’t that clear-cut.

Some consumers will notice that prices have gone up much more than what they would perceive as 3 percent, while some prices have actually gone down, and many prices have stayed the same.

The media is reporting that some retailers are taking advantage of the tax hike to carry out price-gouging (binjo neage), but it’s often difficult for the consumer to tell because there is no regulation at the moment that says what retailers have to indicate on price tags and advertisements. That’s because the 3 percent tax hike may be followed in October 2015 by another 2 percentage point increase, thus making the consumption tax 10 percent, so it was thought that it would be too much of a burden on retailers to force them to follow one pricing indication system right away. However, in April 2017 they will all have to indicate prices as totals that include the tax.

Since last fall, retailers have been allowed to indicate prices any way they want. Some just keep doing what they were doing before and show the zeikomi (including tax) price. Some show both the zeikomi price and the hontai (price without the tax added), but they may show the hontai in larger print than the zeikomi, which will often be in parentheses. And then some show only the hontai, which means the consumer doesn’t know what she is paying for the item until it is rung up at the cashier.

Needless to say, it can get confusing if, like most people, you patronize different retailers for the sake of saving money through comparative shopping. On April 4, the Ministry of Economy Trade and Industry asked gas stations to advertise their prices as zeikomi only, since motorists do their comparative shopping on the move, but it is not an enforceable request. Presumably, a lot of drivers see a hontai in front of a gas station and think it’s zeikomi only to find out after they fill up that the price is higher than they expected.

A Consumer Affairs Agency survey found that 72 percent of food retailers indicated zeikomi only on price tags before April 1, and 9 percent did so afterward. A little more than 14 percent indicated both zeikomi and hontai in March, while 68 percent indicated both in April. Most interesting is that 12 percent showed only hontai on their price tags before the tax hike but 20 percent indicated them exclusively after the hike. In that regard, the problem isn’t price-gouging so much as it is price-confusing.

We did our own informal survey since there are many supermarkets and discount stores near where we live. We found that a number of establishments raised prices even more than 3 percent, but this was to be expected. It doesn’t point to price-gouging, however. It may simply represent an opportunity for some businesses to finally enact price increases they resisted for so long because of the need to be competitive.

For instance, various discount hair-cutting chains who prior to the tax hike charged a standard ¥1,000 per cut raised their set price to ¥1,080, which is more than 3 percent, but most hadn’t changed their prices for years. In some stores, prices for certain items appeared to go up but actually went down if you factored out the tax increase. And some went down even with the tax increase included.

As for indication, most of the stores we visited showed the zeikomi somewhere on the price tags, but enough went the hontai-only or hontai-prominent route to make comparative shopping more of a chore. One particular supermarket, the relatively upscale Yaoko, implemented a novel system. Yaoko indicates the hontai in large print, with the zeikomi in smaller print and in parentheses, complete with decimal point, meaning that the price with tax has been calculated to the hundredth of a yen. Normally, retailers round the fraction down to the nearest ¥1 (unless you sell your wares or services through vending machines, which round the amount up or down to the nearest ¥10), but Yaoko calculates the final price as the total of all the items you purchase at one time.

In a sense, this may sound more rational than rounding every price up or down on the price tag itself, but when we looked at our Yaoko receipt afterward we discovered that the fraction remaining after the items were totaled was then rounded up to the next yen. It doesn’t sound like much for one customer, but we’re talking thousands of customers a day. It isn’t price-gouging, but it’s definitely something.

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