Haircuts and beef bowls helping BOJ's Kuroda win converts

Tue Apr 29, 2014 4:04am EDT
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By Leika Kihara

TOKYO (Reuters) - Rising prices for budget haircuts and bowls of beef and rice are helping Bank of Japan Governor Haruhiko Kuroda win over doubters in his own ranks of his ambitious drive to cast off deflation.

Sluggish exports and a sales tax increase on April 1 had some board members openly questioning Kuroda, and bureaucrats were quietly game-planning policy options.

Now, as early data and anecdotes suggest the recovery in the world's third-biggest economy has not been derailed by the tax hike, investors and other BOJ policymakers are coming around.

Central bank officials scouring the streets found higher prices for deflationary staples such as bargain haircuts and "gyudon", bowls of beef strips with onions over rice that are gobbled up by blue- and white-collar workers across the country.

Barbers were raising prices more than enough to cover the increase in the sales tax to 8 percent from 5 percent, the mandarins found, and restaurants were also able to raise prices.

"If gyudon shops are passing on the higher costs, that tells you something about changes in psychology," said a BOJ official who compared prices at the various beef-bowl restaurant chains. "It's another positive sign for the economy."

Another senior official said evidence is mounting that companies have the pricing power to pass on the burden.

"That's a relief."   Continued...

Bank of Japan Governor Haruhiko Kuroda gestures as he speaks during a seminar in Tokyo March 20, 2014. REUTERS/Yuya Shino