Kantaro Komieya and Kentaro Shiugiyama

TOKYO, Reuters – Maiko Takahashi, a Japanese mother with three children was not one to take advantage of hand-me-downs or pinch pennies even though her family has always had a modest income.

However, times have changed. Today, she is not afraid to wear used clothes. Her obsession with bargains and scrimmaging at the lowest possible prices borders on obsessive.

Takahashi said, “I have started to pay closer attention to tips TV shows give me, such as reducing the amount of time you open your fridge in order to save electricity,” Takahashi is the father of five children who lives north of Tokyo.

“We have started to feel the pinch from going about things in the same way as before so I’ve adjusted.”

Takahashi’s behavior is being mirrored by increasing numbers of Japanese consumers, which underlines a disturbing trend in Japan.

The government had lifted two years’ worth of coronavirus restrictions in March. It was counting on “revenge expenditure”, an increase in demand that triggers a surge in consumption. This would lead to a more robust economy as seen in China, the United States and other countries.

However, with rising energy and food costs, which has been exacerbated by the sharp fall in the Japanese yen in recent months and the conflict in Ukraine, these hopes are rapidly fading.

Japan’s famously frugal consumers, facing rising costs, are cutting back on spending. However, they still have an estimated 50 trillion Japanese yen (or $383 billion), in what is known as forced savings. This amount equals 9% of Japan’s economy.

Economists predict that although some larger companies responded to a government request to increase wages, the gains of 2% won’t be enough to offset rising prices for everything, including flour, diapers, and beer.

March saw a 22% increase in electricity prices for Japan’s resource-poor areas compared with the previous year. This is the highest level in nearly four decades.

Recently, the government updated its economic assessment for the first-time in four months. It cited an expected recovery of spending but also added that the outlook was uncertain.

In unusually open remarks, a government official claimed that there was less chance of an “revenge expenditure” bubble than they had anticipated. He also noted that it was difficult to predict the future beyond this summer.

FINE FEAST

According to economists, Takahashi’s behavior is not surprising considering that more than 90% consumers said in the most recent government survey they expect everyday goods to get more expensive within the next 12 month.

Apart from accepting second-hand uniforms to her son’s kindergarten entry, and exploring further for discounts, the mom of two said that she switched to private, lower-cost brands (PB) for mayonnaise, mustard, and other foods.

It’s not the only one. According to Intage Inc. market research, 22% of PB products for mayonnaise sales rose in March to $22 from 18% in a year. Aeon Co. supermarket saw an increase in PB foods sales by 15% between January and February.

Toru Suehiro (Daiwa Securities Senior Economist) said that the Friday “Golden Week” holiday is the first without COVID-19 limitations in three years. This should lead to a significant improvement in consumer spending. However, this will likely be the peak year for consumption.

He stated that the full impact of rising prices will be apparent in the July-September quarter, and then later. Therefore the Golden Week is likely to be the final feast of the year.”

JTB Corp, Japan’s most prominent travel agency, predicts that the number of vacation travelers will increase about 70% compared to last year. However, it is still three times less than pre-pandemic levels.

Normally, the fall of the yen at two-decades lows would have been a boon to inbound travelers. But Japan is afraid of COVID and has kept its borders open to tourists. Nearly 32 million tourists from abroad contributed nearly $32 billion to Japan’s economy in 2019.

The weakening yen is causing pain to many businesses by raising input costs. They are now just as cautious and cautious as consumers, and they have been reluctant to raise their wages.

Takahashi explained that “prices continue rising and rising for things we can’t survive without,” while salaries remain flat.

“I keep racking my brain over the next thing I should be buying.”

($1 = 130.6400 yen)