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Rising Crude Oil Prices Hit Japanese Consumers

Higher prices for crude oil are being passed on to Japanese consumers, and consumer confidence has dropped by two points.

Japanese consumers are again paying more for gasoline, diesel oil and other petroleum products. This follows the increase of crude oil prices in Asian trading on Tuesday to more than $71 a barrel. Fires at two Japanese refineries this month are expected to put a squeeze on the country's domestic supply, adding to the problem.

Idemitsu Kosan Company, a major oil distributor, says it will raise domestic prices of gasoline and other petroleum products by about two cents a liter beginning Friday, and an additional 15 cents in May. The company says the increase in crude oil prices is too much for it to absorb.

Toshihiko Fukui, governor of The Bank of Japan, voiced his concern about the rising prices at a recent press conference. "It is necessary to keep watch on the world economy and its movement, since crude oil prices are staying high," he said.

Rising oil prices have already had an impact on some Japanese companies. For example, six major paper manufacturing companies have announced rises in the price of printing paper, synthetic resin, and packaging materials used to wrap sweets, cakes and other products.

The higher prices are affecting Japanese consumers, too. The Japanese Cabinet Office said household confidence went down about two points in March - from 49.8 points in February.

Partly as a result of higher fuel prices, the Japanese are turning increasingly to mini-cars, which give better fuel efficiency.

Nearly two million mini-cars were sold in 2005, a 3.6 percent increase over the year before and the highest number in six years. At the same time, sales of other cars dropped to a 24-year low, of about 3.9 million.

The Japanese are also facing higher prices for some fast-food items at McDonald's. Japan's top fast-food chain says it will have to raise prices to increase profits. For example, its set menu, now priced at $4.28 , will go up in price, but the company has not yet decided by how much.

Eiko Harada, McDonald's Japan chairman and president, says the company will open about 200 24-hour shops by this summer.

McDonald's will also start offering the Japanese healthier as well as more expensive food choices next month, by putting salads and yogurt on the menu.