Japan is buzzing this week about inflation, with many companies announcing price increases on everyday products. How is inflation in Japan affecting the country we all love? Read this post to find out!
An Increase in Inflation in Japan. How are Japanese People Taking It?
This weekend Japan’s media began coverage of price increases, with a host of prices rising 6-18% due to higher costs of everything from wheat flour to imported beef. The iconic Big Mac rises in price to 410 yen from 380 yen five years ago, a 1.5-liter bottle of Coca-Cola went up 20 yen to 340 yen, and a beef bowl from Yoshinoya will now set you back 400 yen. The sudden rise in prices has been named the neage rasshu or the Price Increase Rush by the media.
Even Mister Donut is raising their prices by an average of 10 yen per doughnut. Oh, the humanity!
Here are some comments I saw on Twitter from Japanese users:
My company doesn’t raise my salary. Side jobs don’t make much money. The only way to get ahead is to buy products through ‘poi-katsu’ [earning points on purchases].
There’s no way we can win. Prices go up because Japan is dependent on raw materials from foreign countries. #AbolishtheNationalConsumptionTax!
Damn Japan for giving us many bills that require people to spend their salary while stubbornly refusing to raise it!
A 3-pack of takoyaki went from 600 yen to 750 yen in the last 2 months… The price hike at the store is unavoidable, but I am furious at the politicians of the world who created this situation, and the ghost of the Soviet Union who caused the price of wheat to rise!
Observations on Inflation in Japan
I came to Japan in October of 1991, 31 years ago. I didn’t realize it at the time, but I had arrived precisely at the end of the Japan asset price bubble, the biggest speculative bubble in history, during which the value of land in Tokyo was worth more than the entire United States on paper. The bubble burst, causing two “lost decades” of falling land prices and economic stagnation. One “good” aspect of this was that I was able to enjoy 1991 prices all the way up until 2018, when economic growth (and thus, inflation) finally started to tick up.
Getting to pay 1991-era prices for three decades sounds wonderful, until you realize that in a zero-inflation world Japan was trapped in for so long, salaries are also frozen around 1991-era levels. It’s one reason I was thrilled to leave behind my career teaching ESL when I started J-List.
Of course, some prices rose and fell with the price of oil, or what the currencies were doing. Another source of inflation in Japan has always been international companies entering the domestic market with exciting new products. Because if you want to have access to Starbucks coffee, Baskin-Robbins ice cream, or cool Nike shoes, the price will generally be set higher than similar domestic products. Foreign companies also pull salaries up by offering higher wages to go with the higher skill sets they expect of their employees.
Another Challenge for Japan: Zero Interest Policies
America is raising rates to try to get inflation under control, but Bank of Japan governor Haruhiko Kuroda is desperately trying to keep interest rates close to zero. He’s trying to protect Japan’s economy as a whole, but also millions of Japanese households.
While most homeowners in the U.S. switched from floating to fixed-rate mortgages in the aftermath of the 2008 housing crash, nearly half of Japan homeowners have floating-rate loans. Being able to buy or build a house with a low introductory rate is great, but if and when rates rise in Japan, it will cause a lot of economic pain for these families
Hopefully, the world will continue to normalize as we recover from COVID-19, the Russian invasion of Ukraine will reach a positive outcome, and we can all look forward to happier days in the future.
Thanks for reading this post on the reaction by consumers to inflation in Japan. Got any comments or thoughts? Post them below, or share them on Twitter!
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