Invasion of Ukraine may affect daily life in Japan

The Yomiuri Shimbun
Tadashi Komine stands in front of his bread shop in Shinagawa Ward, Tokyo, in late February.

The economic impact of Russia’s invasion of Ukraine may stretch as far as daily life in Japan, as international trading prices for wheat, crude oil and natural gas are rising due to fears that Ukrainian and Russian exports of these products will stall.

Exports of wheat from Ukraine and Russia account for about 30% of the world total, and Russia is also one of the top exporters of crude oil and natural gas.

90% imported

“If wheat prices continue climbing at the current pace, I’ll have to consider raising the prices in my store,” said Tadashi Komine, 51, operator of Komine Bakery in Shinagawa Ward, Tokyo.

Japan relies on imports for about 90% of its domestic consumption of wheat. The government sells the wheat it imports to domestic millers, and prices are set every six months based on the average price of the government’s purchases.

Most of Japan’s wheat imports come from the United States, Canada and Australia — it does not import wheat from Ukraine. However, international prices of wheat have been on the rise lately, also due to such factors as smaller harvests resulting from unusual weather conditions in production areas and increased demand from China.

The price at which the government sells wheat to millers was raised 19% in October last year. It is now ¥61,820 per ton, up nearly ¥10,000 from ¥51,930 in April last year.

As a result, the cost of ingredients for Komine’s shop have increased about ¥200,000 from the start of this year. The purchase prices of butter, chocolate and other items has also gone up, heightening the store’s operating costs by about ¥500,000 in January.

Komine expressed his concern, saying: “My bread is attractive because the prices are reasonable. Customers like that.”

Worry in ‘udon prefecture’

Concern is spreading in Kagawa Prefecture, which residents have dubbed the “udon noodle prefecture.”

A typical price for a bowl of udon noodles with soup is ¥250 to ¥350 in the prefecture. But Masaaki Kagawa, 74, president of the Takamatsu-based company Sanuki Mengyo K.K., which operates udon eateries, is worried.

“Partly because of the novel coronavirus crisis, my company can’t afford to buy extra supplies for the time being. I may finally have to raise prices,” Kagawa said.

On Feb. 25, the Agriculture, Forestry and Fisheries Ministry established a team for discussing “food security.” The team will also consider measures to cope with grain price hikes, including those affected by the invasion.

Pump price rising

Crude oil prices have been at high levels due to the expectations that the world’s economies would recover from the slumps caused by the novel coronavirus pandemic.

According to the Natural Resources and Energy Agency, the nationwide average price of regular gasoline as of Feb. 21 was ¥172 per liter, up ¥0.6 from a week before. The price had by then risen for seven weeks in a row.

The nationwide average price of kerosene also rose ¥0.5 from the preceding week to ¥112.2 per liter.

Japan’s government has taken the unusual step of providing subsidies to oil wholesale companies, with the aim of lowering wholesale prices of gasoline and other fuels. The amount has already reached the upper limit of ¥5 per liter, but in the wake of the invasion of Ukraine, the government plans to raise the maximum subsidy to ¥25 per liter.

A 45-year-old self-employed man in Komae, Tokyo, refueled his car at a gas station in Setagaya Ward in the capital in late February. “I always drive my car for work, so I don’t want gasoline prices to rise any further,” he said.