In Japan small firms see costs rise more often than large ones, yet raise prices just as much: a price list is updated on the cost structure
1 October 2026, 09:27
Every three months the Bank of Japan asks more than nine thousand companies how business is going. The survey is called the Tankan, and Bloomberg made a headline out of the one published today: Japan's large manufacturers are at their most confident in eight years. The index that measures their view of business conditions rose to 24 points, from 22 in June, and it is the sixth quarter in a row that it has improved.
Further down, in the tables few people read, there is a question that matters to anyone running a business, in Japan or in Brescia: are purchase costs rising or falling? And selling prices?
Small firms see costs rise more often, and raise prices as much as large ones
The answer lies in a number the Bank of Japan calls a diffusion index: the percentage of companies answering "rising" minus the percentage answering "falling". Among large manufacturers the index for purchase costs stands at 59 and the one for selling prices at 40. Among small ones, costs stand at 71 and prices at 41.
Put simply: among small firms costs rise more often than among large ones, while the selling-price index is almost the same. The gap between the two indices, 19 points for the large firms, reaches 30 for the small ones.
The index counts companies, not euros: it does not say by how much costs have risen, nor by how much prices have. What it does say is that among small firms the gap between those who see costs rise and those who raise prices is wider. And when the supplier raises its price and the customer does not, the difference does not vanish: it stays in-house, and the margin pays for it, one invoice at a time.
A price born of habit cannot be recalculated
A price list does not update itself. Someone has to know, product by product, how much the cost has changed and how much the price ought to change to leave the same profit.
If the price was born of habit, of an assumption never checked, or of a percentage added by feel to the cost of the raw material, then when costs move there is nothing to recalculate. What remains is an old number and a customer nobody feels like giving a new one to. And since raising the price costs an awkward phone call, while keeping it still costs nothing on the day, the price list stays where it is.
It is the pizzeria that had its menu laminated. Flour, mozzarella and rent go up; the price of the margherita is printed and stays there. The laminated menu looks like a saving on printing: it is the most expensive price list there is, and it is paid for by whoever had it printed.
A price is built on costs, and compared with costs over the same period
Before it depends on the market, a price depends on the cost structure. Building it takes a model that lines up, for each product or product family, everything that goes into the cost: raw material, machining hours, machine set-up, scrap, packaging, transport. On top of those costs goes the margin one wants to earn, and out comes the price.
The advantage shows when a cost moves. The figure is changed in the model and the new price can be read off; the difference between that price and the one on the list is the share of the increase the company is absorbing, in euros, product by product. It is no longer the sales manager's impression: it is a figure.
From there, the question to ask of one's own accounts is a single one: of the cost increases of the last twelve months, how much has ended up in the price? Over the same period, the rise in the cost of each product is compared with the rise in its selling price. Where the two numbers are close, the margin has stayed where it was. Where the cost has gone up and the price has not, the company is giving a discount that nobody decided.
Not every increase can be passed on to the customer, nor is it always worth it: a customer who brings a lot of margin can be kept even at a slightly lower price, as long as it is done knowing what it costs. The whole difference lies there, between a discount chosen and a discount suffered.
With the model in hand, the negotiation changes too. Whoever knows where their price comes from does not defend it: they support it, because they can show the customer which costs have changed and by how much. This is the work of cost analysis, and it is needed precisely in the months when suppliers update their price lists faster than customers do.
A price list that stands still while costs rise is not a stable price. It is a cost that nobody has decided to look at.
This article was prompted by a news item published in Bloomberg on 1 October 2026.