Monday 23 February 2009

An object lesson in frugality from shell-shocked Japanese

Even after years of economic recovery, they fear to splurge

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Guanyu said...

An object lesson in frugality from shell-shocked Japanese

Even after years of economic recovery, they fear to splurge

New York Times
23 February 2009

(TOKYO) As recession-wary Americans adapt to a new frugality, Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect.

The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.

Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whisky, the favourite drink among moneyed Tokyo residents in the booming 1980s, have fallen to a fifth of their peak.

And the nation is losing interest in cars; sales have fallen by half since 1990.

The Takigasaki family in the Tokyo suburb of Nakano goes further to save a yen or two. Although the family has a comfortable nest egg, Hiroko Takigasaki carefully rations her vegetables. When she goes through too many in a given week, she reverts to her cost-saving standby: cabbage stew.

‘You can make almost anything with some cabbage, and perhaps some potato,’ says Ms. Takigasaki, 49, who works part time at a home for people with disabilities.

Her husband has a well-paying job with the electronics giant Fujitsu, but ‘I don’t know when the axe will drop’, she says. ‘Really, we need to save much, much more.’

Japan eventually pulled itself out of the Lost Decade of the 1990s, thanks in part to a boom in exports to the United States and China.

But even as the economy expanded, shell-shocked consumers refused to spend. Between 2001 and 2007, per-capita consumer spending rose only 0.2 per cent. Now, as exports dry up amid a worldwide collapse in demand, Japan’s economy is in free-fall because it cannot rely on domestic consumption to pick up the slack.

In the last three months of 2008, Japan’s economy shrank at an annualised rate of 12.7 per cent, the sharpest decline since the oil shocks of the 1970s.

‘Japan is so dependent on exports that when overseas markets slow down, Japan’s economy teeters on collapse,’ said Hideo Kumano, an economist at the Dai-chi Life Research Institute. ‘On the surface, Japan looked like it had recovered from its Lost Decade of the 1990s. But Japan in fact entered a second Lost Decade - that of lost consumption.’

The Japanese have had some good reasons to scale back spending.

Perhaps most important, the average worker’s pay cheque has shrunk in recent years, even after companies rebounded and bolstered their profits.

That discrepancy is the result of aggressive cost-cutting on the part of Japanese exporters such as Toyota and Sony. They, like American companies now, have sought to fend off cut-throat competition from companies in emerging economies such as South Korea and Taiwan, where labour costs are low.

To better compete, companies slashed jobs and wages, replacing much of their workforce with temporary workers, temps, who had no job security and fewer benefits. Non-traditional workers now make up more than a third of Japan’s labour force.

Younger people are feeling the brunt of that shift. Some 48 per cent of workers aged 24 or younger are temps. These workers, who came of age during a tough job market, tend to shun conspicuous consumption.

They tend to be uninterested in cars. Young Japanese women even seem to be losing their once-insatiable thirst for foreign fashion. -- NYT