In Japan’s Slow Economy, Rare Price Rise Prompts Surplus of Remorse

TOKYO — One of the most talked-about television commercials in Japan this year advertises an unusual product: contrition.

The ad shows a group of workers and executives from an ice cream company lined up in neat rows in front of their suburban Tokyo factory. As gentle folk music plays, they bow in apology.

The company’s transgression? Adding 10 yen, or about 9 cents, to the price of Garigari-kun, a hugely popular soda-flavor ice cream bar. About 500 million of the bright blue snacks are consumed every year, mostly by children.

Increasing prices are a big deal in Japan. The country’s sluggish economy means that the cost of most things has not risen in 20 years, and almost any increase makes headlines.

Consumer prices are a painful economic headache for Japan. The country’s officials have been trying to break this stubborn pattern of deflation by pumping money into the economy and bolstering public spending. Japan’s economy, which has been oscillating between growth and contraction for years, picked up speed in the first quarter, according to government data released on Wednesday.

But the price increases that do go through — like the cost of the Garigari-kun ice cream bar rising to ¥70, from ¥60 — do not reflect a more vibrant economy or a stronger consumer. They usually mean a company is facing higher costs cutting into its profit. The deflationary trends are still firmly in place. And wages are under more pressure than prices, so buying power for most Japanese has declined compared with a generation ago.

“Garigari-kun is meant to be something kids can easily buy with their allowance,” said Fumio Hagiwara, a marketing executive at Akagi Nyugyo, the maker of the ice cream bar. “Even grown-ups have less pocket money these days.”

Akagi last increased prices a quarter of a century ago, and it debated the recent rise for seven or eight years, Mr. Hagiwara said. The rising cost of raw materials finally forced Akagi’s hand, he said. Tighter logging restrictions in China, for instance, meant it had to use more expensive Russian lumber for ice cream sticks.

In stronger economic circumstances, Akagi’s price increase would not stand out. Companies in other places routinely pass on higher costs to consumers. But in Japan, businesses that face rising costs feel they have less ability to do so because wages are flat. Instead, they take a hit to their profits or cut back rather than alienate consumers.

“We don’t have any more income, but taxes are rising,” said Kazuko Ida, 65, who lives in Tokyo. As a result, she said, she is especially reluctant to spend more. “It’s one thing if luxury items are expensive, but if cheap things aren’t cheap anymore, it’s a real problem.”

Japanese policy makers have long identified deflation as enemy No. 1 for the economy. Prime Minister Shinzo Abe won power four years ago on a promise to stamp it out. The central bank has been flooding financial markets with cheap money, and it has gone so far as to cut its benchmark interest rate below zero, a policy that has been tried in only a few other developed countries.

But the results officials have been seeking — robust increases in borrowing and spending, and a sustained rise in prices — have been elusive. The Consumer Price Index is back below zero, after an upswing during Mr. Abe’s first two years in office. Wholesale prices tumbled 4.2 percent in April, their sharpest decline in more than six years.

A recent rise in the value of the yen, after several years of weakness under Mr. Abe, has made beating deflation harder. A weak yen means costlier imports, which helps drive overall inflation. But now imports on the whole are getting cheaper again.

The economic report on Wednesday showed that Japan’s economy expanded 1.7 percent in annualized, price-adjusted terms in the quarter that ended in March. That was significantly faster than forecasts. Still, economists urged caution: Spending by households and businesses was down, and so were exports — all crucial pillars of growth.

Rather than rely on those, the economy benefited from higher government spending and a decline in imports. The extra day in February because of the leap year also helped, specialists said.

“Reasons for the upside surprise were not encouraging,” said Masamichi Adachi, chief Japan economist at JPMorgan Chase. He said the economy was likely to remain stagnant.

Since Mr. Abe’s conservative coalition was elected in December 2012, the economy has expanded in eight quarters and shrunk in five. Newspaper opinion surveys suggest that about half of voters are dissatisfied with his economic program, known as Abenomics. A disorganized political opposition has offered little in the way of alternatives, but an election for the upper house of Parliament in July is adding to pressure to turn things around.

Mr. Abe is looking at ways to restore momentum. The government is drafting a supplementary stimulus budget and is considering delaying an increase in the national sales tax planned for April 2017. The two percentage point tax increase, the second of two planned rises, has already been put off once. Supporters say it is needed to reduce Japan’s large budget deficit. But the first increase, in 2014, hurt consumers and was blamed for pushing the economy into recession.

In the ice cream business, Mr. Hagiwara said Akagi had calculated that Garigari-kun’s sales volume would drop by 7 percent as a result of raising prices. The sales hit, the company believed, would be more than counterbalanced by the higher price.

But it appears that for his company, at least, an apology is an effective way to deal with the pain. Mr. Hagiwara said sales jumped by about 10 percent in the first month or so after the price increase in March, though they have since begun to fall back.

“We figure it will take another year before we know how consumers really take to it,” he said.