Frugal Japanese tighten their belts as prices rise, yen slides
Tokyo, Japan – Tatsuya Yonekura hasn’t raised prices at his Tokyo cafe since it opened three years ago. But as Japan’s inflation rises and the yen slides to a 20-year low against the dollar, Yonakura may be left with no other option.
“I may have to raise the price of alcohol because distributors are paying more money to import it,” he told Al Jazeera. “It’s a tough situation, I’m worried that people will stop coming if they want to pay more.”
The cafe owner’s dilemma comes as more Japanese are practicing kakibo, an approach to budgeting that translates as “household financial ledger,” or otherwise cutting back on spending.
Japan’s household spending fell for the first time in three months, down 2.3 percent from the previous year, as rising prices and a weak currency prompted the country’s famously frugal citizens to tighten their belts further.
Japan’s consumer prices rose 2.5 percent year-on-year in April, surpassing the 2 percent target set by the Bank of Japan (BoJ), driven by inflationary pressures, including the Ukraine war. While inflation remains low by international standards, Japanese consumers are sensitive to rising prices after decades of economic stagnation, which followed the collapse of an asset price bubble in the early 1990s.
Naomi Yakushiji, who recently quit her salaried job at a cooking school to pursue freelance writing, said she plans to cut back on her spending, as she commits to eating foods already in season. And therefore cheaper, known as far.
“The current economic climate certainly makes it a little more difficult,” the 29-year-old Tokyo resident told Al Jazeera.
,[Due to Covid-19] I think we all need to learn to tighten our wallets,” she said. “I’ve also drastically reduced my spending on luxuries like clothes, jewellery, salons and recreational activities… I won’t spend as much money on these things as I did before.”
Yakushiji plans to move to Ireland at the end of the year, adding to his financial concerns. The yen has fallen from 125 in March to around 138 euros.
“I am considering leaving my account open in Japan and leaving money here with the hope of improving the situation,” she said.
negative feeling
John Beerne, vice chairman of research at the Asian Development Bank Institute, said the yen’s sharp decline has fueled market uncertainty and negative sentiment.
“While depreciation is positive for exporters, it could potentially weigh on consumer demand if imported inflation through higher energy prices drives down spending,” Birne told Al Jazeera.
Last month, a survey of 105 major food and beverage companies conducted by Teikoku Databank found that the cost of 6,100 popular foods will increase by an average of 11 percent this year.
Processed foods, often seen as a money-pinching alternative to fresh produce, account for about half of the projected cost increase, including cooking oil, bread, meat, cheese, ham and condiments, and toilet paper. Prices are also expected to go up. The research group pointed to Russia’s war in Ukraine as the “main culprit” for the rising prices.
In April, Japan banned imports of 38 products from Russia, although trade ministry officials said the move would have little impact on the Japanese economy due to the existence of alternative supply routes.
Japan has also banned imports of Russian coal and pledged to eliminate Russian oil, which last year accounted for 4 percent and 11 percent of the country’s supply, respectively. Tokyo also sources 9 percent of its liquefied natural gas (LNG) from Russia.
Energy prices, which were rising earlier, are now rising even more rapidly. Seven of Japan’s 10 major energy providers raised domestic energy prices last month. Among them, the number one player, TEPCO, increased its rates by an average of 115 yen over the past month.
New home buyers are also getting hit. According to a survey conducted by Recruit, the average price of a house in the Tokyo metropolitan area will reach 43.3 million yen in 2021, the highest since 2014. Last year the average mortgage also exceeded 40 million yen ($307,000) for the first time.
However, not all economists see Japan’s rising cost pressures as bad news.
Tokyo-based economist and expert director of Monex Group, Jesper Cole, said he believes Japan has hit an “economic sweet spot”, with supply exceeding demand for the first time in a generation.
“The fact that retailers and manufacturers are passing on really high input costs gives you confidence that consumers will tolerate and accept the price hike,” Cole told Al Jazeera. “In my view, chances are good that the renewed confidence in pricing power will indeed last as the metabolism of Japan’s domestic demand has fundamentally changed for the better.”
While some economists argue the BOJ’s insistence on maintaining low interest rates to boost consumption, especially as policy tightening by central banks around the world, Cole believes Japan The U.S. economy may be about to enter a “virtue cycle” where rising prices do not reduce consumption.
,[BOJ Governor] Kuroda’s reputation and legacy are on the line,” Cole said. “Until we can be certain that Japan has hit the escape pace, it has nothing to lose by staying on the accelerator; avoiding the deflationary trap of a generation since the collapse of the bubble economy.” for.”
Japan’s relatively low wages are part of a complex dynamic. Japan’s median wage rose to $38,400 in 1997, but has effectively remained stable since then – while the current OECD average, after decades of steady growth, is closer to $50,000.
Since Japan’s asset price bubble burst in the early 1990s, companies have largely avoided hiring and raising salaries.
Japan’s economic stagnation has been one of the fastest growing populations in the world.
The proportion of citizens under the age of 14 fell for the 41st straight year in 2021, reaching a record low of 14.65 million. Meanwhile, a third of the population is projected to be above 65 by 2050, with detrimental effects on productivity.
Birne, an economist at the Asian Development Bank Institute, said Japanese companies may soon have to pass the price hike on to customers if cost pressures continue to mount.
“It can also help stimulate aggregate demand,” he said. ,[Which] would then make wage increases more viable for Japanese firms.”
For Japanese like Yakushiji, hope soaring prices mark the start of a long-awaited economic revival.
“These times have certainly forced us to cut our discretionary spending and it will be interesting to see how the country will recover financially in light of this,” he said.
Frugal Japanese tighten their belts as prices rise, the yen slide first appeared on Al Jazeera.
