Vend­ing Ma­chines in Ja­pan Sell De­fla­tion

The ubiq­ui­tous ma­chines are locked in a soft-drink price war Many peo­ple “are still at­tached to the idea of low prices”

Bloomberg Businessweek (Asia) - - Global Economics - −Kevin Buck­land and Kyoko Shi­modoi

Ja­pan has vend­ing ma­chines every­where: in the cap­i­tal’s vast net­work of train and sub­way sta­tions, at Ky­oto’s his­toric shrines and tem­ples, on Ok­i­nawa’s re­motest is­lands, and even on Mt. Fuji. With 5 mil­lion of them, about one for ev­ery 25 peo­ple, Ja­pan has the most vend­ing ma­chines per capita in the world—dou­ble the rate in the U.S. The ma­chines sell train tick­ets, flow­ers, and fried chicken, among other items. More than half of­fer soft drinks, making bev­er­ages the in­dus­try’s largest cat­e­gory. They’re also an eco­nomic indi­ca­tor.

The soft-drink vend­ing ma­chines ex­em­plify how dif­fi­cult it is to stamp out the de­fla­tion that’s sti­fling growth in Ja­pan. Gov­ern­ment data show the prices of soft drinks are at their low­est since 1976. About one in three ma­chines has re­duced prices, ac­cord­ing to Tokyo-based bev­er­age re­searcher In­ryou Souken. At one ma­chine at the main in­ter­sec­tion of Tokyo’s fash­ion­able Shi­rokanedai neigh­bor­hood, a half-liter su­per­size can of Coca-Cola sells for only 100 yen, or the equiv­a­lent of 82¢. The stan­dard soft drink price for all vend­ing ma­chines is 130 yen. That’s the price at sub­ur­ban lo­ca­tions and in train sta­tions, where com­pe­ti­tion is lim­ited.

Op­er­a­tors of the soft-drink vend­ing ma­chines have been locked in a price war with su­per­mar­kets and dis­count re­tail­ers for years. Af­ter the gov­ern­ment hiked the sales tax in April 2014, many ven­dors chose to lower prices fur­ther to soften the blow of the tax. “There’s a great many peo­ple who are still at­tached to the idea of low prices,” says Takeshi Mi­nami, an econ­o­mist at Nor­inchukin Re­search In­sti­tute in Tokyo. “It’s deeply rooted.”

With the re­cov­ery still frag­ile, bud­get-con­scious con­sumers are in­creas­ingly pack­ing drinks from home when they go out. When they pur­chase them, they tend to buy at su­per­mar­kets and con­ve­nience stores offering deep dis­counts. That pres­sures vend­ing ma­chine op­er­a­tors to lower prices, says Yano Re­search In­sti­tute in Tokyo.

The com­pe­ti­tion is in­tense: A halfliter bot­tle of Coke goes for 75 yen (55 with a coupon) at a Don Qui­jote dis­count re­tailer across the street from the Shi­rokanedai vend­ing ma­chine. Who­ever wins the mar­ket­ing war in soft drinks, the de­pressed prices that re­sult will help keep de­fla­tion alive in the Ja­panese econ­omy.

The bot­tom line The prices at Ja­pan’s soft-drink vend­ing ma­chines demon­strate how hard it is for the gov­ern­ment to curb de­fla­tion­ary forces.

Vend­ing ma­chines in Ja­pan sell beer, burg­ers, un­der­wear, ra­men, um­brel­las, ra­zors, flo­ral ar­range­ments, toy cars, toasted sand­wiches, fresh eggs, neck­ties, and bat­ter­ies Bev­er­age vend­ing ma­chine in Tokyo

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