Japanโs facing a tough economic climate โ inflationโs up, the yenโs down, and wages havenโt budged. Businesses canโt keep prices stable, and people canโt keep up with the hikes. This squeeze is hitting every corner of Japanese life, but one industry is really taking a hit: ramen shops. Many are struggling to stay afloat and are facing closure.
One by one
Ramen shop owners are sounding the alarm: business is not looking good. Despite ramen being a beloved national dish and a must-try for tourists, many ramen shops are now facing a rapid decline. The reason? Ongoing inflation, skyrocketing raw material prices, and a weak yen that have hit all industries hardโespecially restaurants.
Ramen shops have weathered tough times before, so this didnโt happen overnight. Like many industries, they struggled after the COVID-19 pandemic, with 54 ramen businesses going bankrupt in 2020 alone. There was a brief lift with pandemic aid and interest-free loans, but as those supports faded and the post-pandemic economy took hold, things started to go south again.
In 2023, bankruptcy cases among ramen shops soared to 53, with debts over 10 million yen, marking a 114.2% increase from the previous year. Unfortunately, 2024 is on track to set new records. By July, the number of bankruptcies had already hit 53, and it might top 100 by yearโs endโa first for the industry. Regionally, the Kanto area felt the biggest impact in 2023 with 14 cases, followed by the Chugoku region with 8. The high number of ramen shops and tough competition in these areas are likely to blame.
At the heart of this crisis is a vicious cycle of inflation. Raw material costs have surged by 10% over the past two years, driving up the cost of making ramen. While ingredient prices climb, production costs follow suit. However, many ramen shops are reluctant to raise their prices, fearing theyโll lose customers if they do.
A downward spiral
Japan had relatively low inflation until 2021, but the situation changed in 2022. By January 2023, inflation had surged to 4.3% year-on-year, driven by rising food and energy costs. Contributing factors include the pandemic and the Russia-Ukraine conflict pushing up commodity prices, supply and demand imbalances, and disruptions in supply chains due to labor shortages.
A 2022 survey in Niigata Prefecture showed how quickly inflation began affecting various industries. Out of 207 companies in transportation, food service, and manufacturing, about 89% said rising procurement costs were squeezing their profits. This problem has worsened, with a recent April 2024 survey by the Yamanashi Prefecture Chamber of Commerce and Industry finding that 96% of small and medium-sized businesses are now struggling with soaring prices.
For ramen businesses, the main challenge is the sharp rise in raw material costs over the past three years. According to Teikoku Databank, the ramen production cost index reached 113.5 in June 2024, a 10% jump from the 2022 average. Pork, including bones and back fat, has seen prices climb 20% annually. Key ingredients like wheat for noodles and bamboo shoots are also pricey due to poor harvests and a weak yen. Plus, cooking oil prices have surged by 26% since May 2023.
Rising electricity costs are adding to the pressure on ramen shops. Many depend on slow, long heating for their soups, which is key to their traditional recipes and top-notch flavor. With utility bills soaring, keeping up this process is getting harder. Though cutting it might seem like a quick way to save money, for many owners, this is a time-honored part of their craftโsomething theyโre not willing to compromise on.
Adding to the concern is the flatlining of real wage growth. In short, prices are going up while wages remain flat. What does this mean? Customers are less inclined to pay more for the same service. If their favorite ramen shop raises prices, theyโll simply head to a place with cheaper options.
Struggling to pass on costs
Starting a ramen shop is relatively simple, with minimal investment needed for equipment and facilities. But staying in the game is another story. With fierce competition and shifting customer preferences, itโs tough enoughโespecially when the economy isnโt on your side.
“Weโve been running on very tight margins, and now, with the rising costs of ingredients and utilitiesโelectricity, gas, waterโitโs becoming unsustainable. Weโve got a mix of full-time, part-time, and temporary staff, and even though weโve raised prices to cover their wages, itโs just not cutting it,” shared Ramen Shop Manager Inoue Tatsuya in an interview with NHK.
The obvious move would be to pass these rising costs onto customers by raising menu prices. However, it’s not as simple as it sounds. Ramen isnโt just a national favorite; itโs a daily staple for many. Figuring out the “right price” is trickier than with other foods. Many ramen shops are especially cautious about crossing the “1,000 yen barrier”โraising prices beyond this could mean losing customers to competitors.
And these concerns are backed up by customer behavior. A 2024 survey by the Cabinet Office on food purchases reveals that out of 2,875 people nationwide, 60% have switched to cheaper alternatives. When asked about price increases, 24% said they wouldnโt accept any hike at all. NHK also interviewed supermarket shoppers to get their take on rising prices.
“Iโm hoping prices wonโt rise, but Iโve kind of given up. I just stick to the cheapest stuff I can find in flyers,” said a woman in her 70s.
This trend of tightening the purse strings applies to both grocery shopping and dining out. Itโs no wonder ramen shop owners are hesitant to raise prices when there are so many competitors out there.
Breaking the barrier
Despite this, many ramen shops in Tokyo and elsewhere have already priced their bowls above 1,000 yenโit could soon be the standard. However, those that have kept their prices between 600-800 yen since before the pandemic are still feeling the pressure. Tonkotsu ramen, in particular, has been slow to cross this price barrier.
Despite its popularity with tourists and its sky-high prices abroad, Tonkotsu Ramen remains surprisingly affordable in Japan. Even Ichiran, a famous chain, still serves it for 980 yen. But some ramen shop owners think this is unfair and hurting their businesses.
Kota Kai, who runs the popular Debuchan ramen shop in Tokyo, has been outspoken about the issue on X. His Hakata Tonkotsu ramen has jumped 60% in price over the past two and a half years, going from 690 yen in 2021 to 1,100 yen in 2024.
In an interview with Toyo Keizai, Kota shared that heโs realized customers arenโt just buying a bowl of soupโtheyโre paying for years of skill, unique flavors, and premium ingredients. The price should reflect these production costs. Kota is spearheading this movement, aiming to set a precedent for the industry and inspire others to follow suit.
โAs far as Iโve researched, I donโt think thereโs another shop pricing Hakata Ramen at 1,100 yen. I believe that day will come eventually, but rather than wait for others, I decided to take the lead,โ he said.
Striking the balance
In the first half of the year, 4,800 companies went bankrupt nationwideโthe highest since 2014. The service industry is hit hard, with 1,228 closures. For small operations like ramen shops, the relentless inflation makes shutting down an increasing threat and, for many, an unavoidable reality.
In this scenario, adjusting prices across industries appears to be the only way to avoid bankruptcy. This might make our favorite foods more expensive, but tough times demand difficult, yet necessary, changes. We may soon see ramen bowls cost more, but paying an extra 200 yen could be worth it to keep our favorite places open and prevent widespread job losses.
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