Japan Multi-Asset: The new pricing era: Pass-throughs fueling Japan‘s virtuous cycle

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Japan Multi-Asset: The new pricing era: Pass-throughs fueling Japan‘s virtuous cycle

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17 Jun 2026 02:35:12 ET │ 37 pages

Japan Multi-Asset

The new pricing era: Pass-throughs fueling Japan's virtuous cycle

CITI'S TAKE

Japan Equity Strategy

Japanese firms are experiencing growing cost pressure as the Middle East

situation pushes up oil prices. In today’s Japan, however, where a virtuous Ryota Sakagami AC

cycle of wages and prices is increasingly taking hold, companies have +81-3-6776-4653

become much more proactive on price pass-throughs than during past ryota.sakagami@citi.com

energy shocks, fueling a shift to a dynamic in which rising costs boost

nominal growth. This report contains a multifaceted discussion of 1) the Keishi Ueda

impact this price pass-through trend is having on Japanese inflation, +81-3-6776-5110

monetary policy, and corporate earnings, and 2) the approach of each sector keishi.ueda@citi.com

to price pass-throughs and stocks to watch.

Japan Economics

Japan Economics: proactive price pass-throughs boost inflation — The rise in oil Tomohisa Fujiki AC

prices caused by the deterioration in the Middle East situation prompted us to raise +81-3-6776-4684

our 2026 core CPI forecast to 2.1%. Although core CPI is set to remain below 2% for tomohisa.fujiki@citi.com

now because of subsidies and other factors, we think it may rise temporarily to over

3% early next year as a result of the ripple effects of rising energy prices and of Sosuke Nakamura

companies’ aggressive price pass-throughs. In recent years, Japanese companies +81-3-6776-4593

have been increasingly proactive in passing higher costs on in selling prices, sosuke.nakamura@citi.com

supported by a virtuous cycle wages and prices fueled by solid wage hikes in spring

wage negotiations.