FOR Tokyo-based condiments maker Kagome, and perhaps for Japan’s government, the challenge of breaking with a decade and a half of deflation boils down to the price of a bottle of ketchup.

    Japan’s most popular ketchup brand is hiking prices for the first time in 25 years in April, the kind of inflation that Prime Minister Shinzo Abe’s economic policies are aimed at encouraging.

    But Kagome, like most companies, fears that consumers are not ready to pay more.

    “When you’re managing your daily grocery spending, it’s an accumulation of small expenditures. And as you make small purchases, you notice that prices are slowly rising, and consumers get worried,” said Fumitaka Ono, a manager in Kagome’s product development department.

    Prices on ordinary items from toilet paper to frozen meals have been rising as companies take steps to offset the weaker yen in recent weeks. That has put pressure on household spending and consumer confidence less than a year after a sales tax hike sent the economy into recession.

    Stagnant wages and public concern about the future compound the problems facing Bank of Japan Governor Haruhiko Kuroda, nearly two years after a pledge to push inflation to 2 percent through a massive asset purchase program.

    Opposition party members have questioned the effectiveness of that target and Kuroda’s attempt to smash what he has called Japan’s “deflationary mindset,” a recession-era habit where saving money became a reflexive response to declining prices.

    Economic theory predicts that consumers spend more in an inflationary environment, but that deflationary mindset can act as a brake.

    “When they expect more inflation, people spend less, not more, because they expect prices to go up, but they don’t expect their incomes to go up as much,” said Richard Katz, the editor of the Oriental Economist.(SD-Agencies)