Via New York Times
- 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 whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.
- 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 percent. 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.
- “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 average worker’s paycheck 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 like Toyota and Sony. They, like American companies now, have sought to fend off cutthroat competition from companies in emerging economies like South Korea and Taiwan, where labor costs are low. (this is your global wage arbitrage I speak about since blog inception taking root - it will weaken labor's power in developed countries, under the threat of competition from lower wage countries) To better compete, companies slashed jobs and wages, replacing much of their work force with temporary workers who had no job security and fewer benefits. Nontraditional workers now make up more than a third of Japan’s labor force. (sound familiar?) [Oct 28, 2008: Pooring of Japan Too?]
- Younger people are feeling the brunt of that shift. Some 48 percent of workers age 24 or younger are temps. These workers, who came of age during a tough job market, tend to shun conspicuous consumption. Young Japanese women even seem to be losing their once- insatiable thirst for foreign fashion. Louis Vuitton, for example, reported a 10 percent drop in its sales in Japan in 2008.
- Japan’s aging population is not helping consumption. Businesses had hoped that baby boomers — the generation that reaped the benefits of Japan’s postwar breakneck economic growth — would splurge their lifetime savings upon retirement, which began en masse in 2007. But that has not happened at the scale that companies had hoped.
- Economists blame this slow spending on widespread distrust of Japan’s pension system, which is buckling under the weight of one of the world’s most rapidly aging societies. (sound familiar?) That could serve as a warning for the United States, where workers’ 401(k)’s have been ravaged by declining stocks, pensions are disappearing, and the long-term solvency of the Social Security system is in question. [Sep 1, 2008: Laboring Longer is Growing Trend for Americans]
[Nov 17, 2008: Poverty, Pension Fears Drive Japan's Elderly Citizens to Crime]
[Dec 2007: Do the Bottom 80% of Americans Stand a Chance?]
