Japan Firms Bracing for Longer-Term Oil Price Rise

Tokyo, April 14 (Jiji Press)–Japanese companies are bracing themselves for a longer-term crude oil price surge after the United States and Iran failed to reach a deal to end their ongoing military conflict. Companies plan to accelerate moves to diversify their supply routes and hike prices of their products to cover rising costs in case the conflict and higher oil prices drag on longer than expected. But many face the risk of having to curtail their operations. Disappointment spread among Japanese businesses Monday after Washington and Tehran ended their two-day peace talks Sunday without reaching an agreement. Company officials said that their “faint” sense of optimism has “vanished,” while others said that the unsuccessful discussions are “unfortunate.” Meanwhile, an official of a materials producer said, “We’ll closely monitor the situation, which is still very much fluid.” “The situation won’t change immediately just because of how the talks ended,” an official of a chemical maker said. Many companies have already been hit by the fallout from the Middle East tensions. On Monday, Toto Ltd. officials said that the company has stopped taking new orders for prefabricated bathrooms, reflecting unstable supplies of naphtha, used in organic solvents for adhesive film, protective coating and many other products, amid the prolonged blockade of the Strait of Hormuz triggered by U.S.-Israeli attacks on Iran. Housing equipment maker Lixil Corp. said that it may restrict production, shipment and orders for its products due to materials shortages. “The current situation goes far beyond the scope of our own efforts,” the company said, hinting at a possible price revision. At a press conference, Asahi Kasei Corp. Chairman Hideki Kobori mentioned raising prices of the company’s mainstay Saran Wrap, plastic film wrap. “We’ll work to gradually reflect the higher costs in our product prices, so as to prevent a situation like the first oil crisis” of the 1970s when panic buying occurred, he said. Panasonic Corp. President Akira Toyoshima said, “We’ll consider supply network changes and measures to tackle rising material costs, based on (the assumption) that the situation would be prolonged.” Nonmanufacturing companies are also concerned over the Middle East tensions. “We’re worried about the electricity bills of our stores, as well as the impact (of the conflict) on packaging materials,” convenience store chain FamilyMart Co. President Tatsuo Odani said Wednesday. “I think (the bills and prices) would all rise,” he added. Retail giant Aeon Co. President Akio Yoshida on Thursday said, “People’s saving-oriented mindset will likely continue amid the uncertainties about the future.” According to a survey released by Teikoku Databank Ltd. earlier this month, 43.8 pct of the 1,686 responding companies said they will have to cut back on their mainstay operations if crude oil prices remain elevated for less than six months. With multiple answers allowed, companies were asked about the negative impact the soaring oil prices have on their business operations. Over 70 pct pointed to a rise in fuel costs of company-owned vehicles, and over 60 pct to increases in the prices of crude oil-derived raw materials and in logistics and transportation costs. END [Copyright The Jiji Press, Ltd.]