HOPE FIZZLES FOR ‘REVENGE SPENDING’ IN JAPAN
Maiko Takahashi was never one to pinch pennies or accept hand-medowns for her children, even though circumstances for her single-income family have always been fairly modest.
But times have changed. Nowadays, the Japanese mother of three has no trouble with used clothes and her pursuit of bargains borders on the obsessive.
“I’ve started to pay close attention to tips on TV shows, like minimising the number of times you open the fridge to save electricity,” said Takahashi, whose family of five lives in the suburbs north of Tokyo.
“We’ve started to feel the pinch going about things the usual way, so I’ve made adjustments.”
Takahashi’s behaviour is mirrored by a growing number of consumers and underlines a worrying trend for Japan.
After lifting two years of on-and-off coronavirus curbs in March, the government was counting on “revenge spending” — pent-up demand triggering a splurge that boosts consumption — as has been seen in some other major economies.
But with energy, food and other living costs soaring — exacerbated by a sharp decline in the yen and the war in Ukraine — those hopes are fading fast.
Facing the prospect of rising prices, Japan’s famously thrifty consumers are tightening their belts even as they sit on the remains of an estimated ¥50 trillion (US$385 billion) — equivalent to 9% of the economy — in “forced savings”, as the Bank of Japan calls it, accrued during the pandemic.
Some bigger companies have answered a government call to raise wages, but the gains of some 2% will be swallowed up by higher prices of everything from flour, to diapers and beer, economists say.
In March, electricity prices jumped 22% from the previous year — the most in more than four decades.
“The chance of a ‘revenge spending’ burst is becoming smaller than we had expected,” a government official conceded, noting that prospects were especially uncertain beyond the summer.
With more than 90% of consumers saying in the latest government survey that they expected everyday goods to become more expensive over the next 12 months, economists say it is no surprise to see behaviour like Takahashi’s.
In addition to accepting used uniforms for her son entering kindergarten, and venturing further in search of discounts, the stayat-home mother said she has switched to lower-cost private brands for mayonnaise, ketchup and other food.
She’s not alone. The share of private-brand items for mayonnaise purchases nationwide rose to 22% in March from 18% a year earlier, according to the market research firm Intage Inc.
The Golden Week holiday from April 29 to May 5 was the first in three years without Covid restrictions, and early estimates were that spending would be about 40% higher than a year ago. But that was likely to be the high point for consumption this year, said Daiwa Securities senior economist Toru Suehiro.
“The full-fledged impact of rising costs will emerge in the July-September quarter and later, so the Golden Week will probably be the last feast of the year,” he said.
Meanwhile, the weak yen has caused pain for many companies by increasing input costs, making them just as cautious as consumers — and reluctant to raise wages.
“Prices keep rising and rising for items we can’t live without, while salaries are flat,” Takahashi said.
“I’m constantly racking my brains over what I can skimp on next.”