The land of the rising sun is now the land of the rising prices, and Japan’s trustbusters have finally decided to crack the whip. This morning, investigators from the Japan Fair Trade Commission (JFTC) raided the offices of four major ice cream makers, including Unilever’s local subsidiary, on suspicion of fixing prices for soft-serve ice cream. It is a move that sent a chill through the industry and a clear signal that Tokyo is losing its taste for corporate collusion.
The raids, which began at 8 a.m. local time, targeted Akagi Nyugyo, a major dairy firm, along with three other companies that dominate the market for soft-serve mix. The JFTC alleges that these firms conspired to keep prices artificially high, effectively fleecing vendors and consumers alike. Unilever, which owns the Magnum and Ben & Jerry’s brands globally, confirmed that its Japanese division was among those visited. The company said it is cooperating fully, but its shares dipped 0.8% in London trading on the news.
For the City of London, this is more than just a story about overpriced cones. It is a textbook case of what happens when markets lose their competitive edge. Japan’s ice cream market is notoriously concentrated, with the top five firms controlling an estimated 80% of the soft-serve segment. When you have that kind of market power, the temptation to fix prices is as irresistible as a scoop of Häagen-Dazs on a summer day. The JFTC’s intervention is long overdue, but it raises a crucial question: how many other industries in Japan are operating under similar tacit agreements?
The timing of this probe is particularly interesting. Japan’s economy is finally showing signs of inflation, with core consumer prices rising 2.8% year-on-year in October. The Bank of Japan has spent decades fighting deflation, but now it faces the opposite problem: businesses taking advantage of pricing power to boost margins. Central bank governor Kazuo Ueda has made it clear that he wants inflation to be driven by demand, not corporate collusion. This crackdown should be seen as a complementary policy to the Bank’s ultra-loose stance. If the JFTC can prove price-fixing, it will send a strong message that the government will not tolerate profiteering.
But let’s not get carried away with regulatory triumphalism. Price-fixing probes are notoriously difficult to prove, and the fines rarely match the profits made from collusion. In 2020, the JFTC fined four construction companies a paltry ¥1.3 billion for bid-rigging. That is chump change for firms that can earn that much in a single quarter. The ice cream makers involved are likely to negotiate settlements, and the ultimate punishment will probably be a slap on the wrist. For the markets, the real story is the signal it sends: Japan is serious about enforcing competition law, and foreign investors should take note.
This also has implications for the yen. Capital flight has been a nagging issue for Japan, as investors seek higher yields abroad. A perception that Tokyo is cracking down on corporate malfeasance could bolster confidence in Japanese equities and stem the outflow. However, the impact on the currency will be marginal at best. The yen remains under pressure from the US-Japan interest rate differential, and a few ice cream raids won’t change that.
So what does this mean for your portfolio? If you own shares in Unilever or any of the other targeted firms, expect a bit of volatility in the short term. But the long-term impact is minimal. These companies have deep pockets and strong franchise value. The real risk is regulatory creep if the JFTC decides to expand its probe into other consumer goods. Keep an eye on the food and beverage sector, where margins are already thin and any disruption could hit earnings.
Ultimately, this is a story about the eternal tug-of-war between corporate profits and consumer welfare. Japan’s ice cream giants may have been caught with their hands in the till, but the market has a way of punishing such behaviour. In the long run, competitive forces tend to drive prices down, even without government intervention. The question is whether the JFTC’s raid will accelerate that process or simply create a temporary chill.
As for me, I’ll stick to my view that regulatory probes are usually noise. But in a market obsessed with inflation and governance, they can move the needle. So if you’re a Japan bull, take this as a sign that the authorities are on the job. If you’re a bear, it’s just another reason to look elsewhere. Either way, keep your eyes on the bottom line.
