Researcher ORCID Identifier

0009-0000-1462-4621

Graduation Year

2026

Date of Submission

4-2026

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Michael Gelman

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2026 Taketo Hayashi

Abstract

This thesis examines why food-away-from-home inflation in Japan was persistently lower than in the United States from 1995 to 2021 and why this dynamic changed after 2021 during the COVID-19 pandemic. Two structural buffers sustained the divergence: wage stagnation in Japan, which kept restaurant labor costs flat for nearly three decades, and a strong yen, which absorbed global commodity price shocks before they could reach restaurant menus. In 2008, the financial crisis sent food and energy prices skyrocketing. However, even though Japan imports most of its food and energy, the effects from global price increases were due to a strong yen and flat labor costs. In 2021, both buffers collapsed simultaneously. The yen depreciated sharply, raising the cost of imported ingredients and forcing restaurants to raise menu prices for the first time in decades. Rising prices in turn created pressure for wage increases, effectively ending Japan's prolonged wage stagnation. Regression analysis confirms that the previous year’s dining-out inflation is the strongest predictor of the current year’s dining-out prices which is consistent with menu cost theory. Japan’s coefficient of 0.83 is higher than the US’s 0.55, meaning that Japan’s dining-out prices are more self-perpetuating. The findings suggest that Japan’s near-zero dining-out inflation was not a permanent feature of the Japanese economy but a structural equilibrium that depended on wage stagnation and a strong yen. 

 

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