A jeans price war got under way with earnest today with Aeon, Japan's largest retailer, announcing that from Friday it will be retailing jeans at JPY880 (US$9.2), just over a hundred yen less than the JPY990 price offered by Fast Retailing's Gu stores.

The fall-out from such a price battle will bode ill for Asia's garment industry, said Tokyo analysts, with the likes of Fast Retailing using its massive market muscle to squeeze suppliers who are facing already razor thin profit margins in China.

Aeon is also taking advantage of production in China to lower the price, just as Fast Retailing has done.

However, FR managed to cut costs further recently by moving its focus to its sewing operations in Cambodia where there are no tariffs on denim products. Aeon is pursuing a similar stategy say analysts.

Both companies however will continue to look to China for their raw materials.

By Michael Fitzpatrick.