Japan Inc sounds alarm on consumer spending

By Izumi Nakagawa and Stanley White

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The main problem is wages are not rising fast enough to keep pace with rising food prices, and consumers are starting to cut back on other goods.

Really? Exactly what I said in response to strangerland's posts just yesterday supporting another 3 trillion yen to prop up the Japanese agriculture industry. Finally, Japan Inc. is waking up to the stupidity of Abenomics. On the one hand, Abe and Kuroda devalued the yen by about 20%, causing the cost of the food Japan needs to import -- about 60% -- to go up by that amount. While on the other hand dumping trillions into the helplessly broken JA model. And they wonder why people are not running out to spend more on other things. Called a Catch-22.

20 ( +22 / -2 )

"Do not believe in official statistics" could be a mantra in Japan. Always be sure they are measuring what they say they are.

13 ( +13 / -0 )

Retailers who say such things should be careful not to be imprisoned under the State Security Bill. In one of the four sections, it makes it a crime to say anything that may harm the economy.

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The main problem is wages are not rising fast enough to keep pace with rising food prices, and consumers are starting to cut back on other goods.

This is the Abenomics of a liberal government. They cut corporate taxes and increase sales tax with no legislation to ensure the corporate cuts were passed onto the consumer through salary increases. Many retailers have reported dramatic drops in sales since the sales tax increase. Mistukoshi reported a 20% drop in sales in the first six months after the sales tax increase, but nobody is listening! Abe and his economist cronies just keep pulling arrows out of their butts and keep expecting everyone to believe, "It's all under control!" For the Japanese economy to recover it needs to put more money into the pockets of consumers to increase spending so the sales tax increase means something besides another financial burden on Naoki Average. The Japanese economy is doomed under the current government simply because they are clinging onto the ideals of the bubble era, which is finished! They are relying on international markets they no longer exist for Japan. The electronics, car and engineering markets have been taken over by other Asian countries. The only way the economy will recover is through innovative and radical economic plans, not by recycling the same old crap from yesteryear. They should drop the sales tax on Japanese goods and increase it on foreign goods. That would be a good start. Then, they should freeze salaries and bonuses of corporate executives and create legislation to increase workers' salaries by at least 5-10% for 3-5 years to let the retail sales bounce back. They are trying to get blood out of a stone and keep whipping the same old dead horse!

12 ( +13 / -1 )

The solution is to just add more arrows.

11 ( +12 / -1 )

Was at a restaurant yesterday for lunch, and they had a sign in the restroom advertising for new staff. The starting wage? Y680 per hour. Look at the menu of the restaurant, and the cheapest dish was Y700, so if you chose to work at this place, you would have to work more than an hour to afford anything to eat! That is the reason people aren't going out and spending crazily on items. It is also the reason that they aren't getting married and having children, there is so much angst and worry about the future that everyone is paralyzed.

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“The government’s initial growth strategy did not really expand the pie. Now the government is simply left trying to redistribute wealth.”

That's a scary thought, but if they do, a place to start would be cutting the salaries and benefits of those in the top echelon of the ministerial gerontocracies, retiring those who serve no purpose, and then bumping up the salaries of workers at the bottom levels. Or even better just force the old and in the way bureaucrats out and save money.

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Abe is using a broken down formula that worked decades ago but is not longer viable for the current economy.

Real wages "rise" .05% Wow, I'll bet the housewives across the country are jumping at the opportunity to spend less the 1 or two "extra" yen per month their husbands bring home!

7 ( +10 / -3 )

What? you mean increasing the sales tax without any compensation for the consumer ( eg. cutting income or other taxes / brackets) whilst continuing to bleat about the glory of return to inflation which just translates to more financial pain for majority of the population that didn't benefit from stock price increases and don't work for the top 10% or so companies that increased wages for.its regular workers is not resulting in increased consumption? Who on earth would have thought? And Abe,s solution is to increase the sales tax again whilst spending trillions on propping up the ridiculously inefficient farmers and throwing away taxpayers money on promises and pledges on every international trip he makes. Btw, where is that original mystical 3rd arrow gone? How about pulling it out of where the sun don't shine before talking about 3 " new arrows " and such and actually doing something that would really help the consumers for a change because the incoming tax increases are sure not not gonna do it.

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Economies cannot grow infinitely with finite resources. Wake up! - consumption for consumptions sake, just to prop up a fundamentally flawed economic sytem is doomed to fail.

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I'm no economist but when you increase the sales tax by 1% maybe the government should have reduced income tax by the same amount. Then repeat and rinse until you get to the sales tax level you want. Shops May swallow 1% and not pass on the increase initially and the people will have more in their pay check and the government are guaranteed their tax. But with the demographic situation older people don't need to buy as much crap, and parents and single just want to spend money on themselves and family.Might be Easier if they built houses that lasted and didn't need to be torn down and rebuilt a new every 30 years as people just can't afford these extortionate new home prices.but who am I, this just helped the house builders years ago and now they're running out of consumers as the older peeps don't want a NEW home with all the trimming And you people can't afford it. We don't need to spend if we live with our parents or just rent. Sadly they reliedtoo much on the Sonys, Toyota, Toshibas for too and that was fine years ago when the world wanted quality goods. Now the world can get the same quality from Korea/ US/ EU and China,and other countries now.

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No surprises here, Japan suffers from insufficient aggregate demand and an unbalanced income distribution. The solutions to these problems are very simple and have been well understood (by people who actually understand economics that is) since the 1930's. But they are off the table in Japan (and everywhere else) due to the GroupThink of right-wing political ideology, the need of those at the top to protect the current fraudulent economic system, and wacko beliefs in zombie economic theories. Until all that changes, "Abenomics" will continue to be just a giant waste of everybody's time, and no improvements of any significance will be coming.

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Population falling, so isn't logical that consumer spending should fall too?

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Ha, ha, ha! I predicted this months ago. Now finally the distress call is coming out of the ruling class itself.

Any surprises? Upping the consumption tax while wages are depressed: What do you expect? To give Abe his due, he asked the corporations to raise wages. They did not for the most part. Certainly Abe's economic policies are a joke. But Japan Inc. is a part of this joke. The greedy and shortsighted capitalists did not care a jot for even something as fundamental living wages. Surprise, surprise, people are spending less. They are spending less because they have less.

The fall of the population is a part of the consumption drop, not the cause. People are not having children because it is too expensive, among other reasons, such urban logistics. No children would mean more money to spend. But that is not the case.

The dreadful pension system is no double another factor, but likely a tertiary one.

Do you ever get the impression that this country is run by morons? I say trust your impressions in this case.

7 ( +7 / -0 )

"A sales tax hike last year to 8% from 5% helped tip the economy into a brief recession."

"... the government plans to raise the nationwide sales tax again, to 10% in 2017 from 8 percent..."

Just sheer lunacy if this actually transpires.

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Japan really is a hopeless basket case of a country. But there's nothing that can be done now to rescue the country from all its hopeless economic problems. Foreigners and many Japanese too I'm sure are hastily searching for ways to get out of the country before things get much worse, which they will.

On October 30th the BOJ is expected to massively raise the monthly Yen 80 trillion "stimulus" they flood the market with. Doesn't work to stimulate the economy at all but they do it anyway. The result will be another huge devaluation of the yen so anybody unwisely holding yen has a couple of weeks or so to divest themselves of this poisonous currency.

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Statistically speaking, 78.3% of all statistics are made up.....

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I do not buy anything I do not need, and I eat lightly and healthy. Why should I buy things if I do not need them? I do not even have a sofa.

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More money printing coming soon. If BoJ doesn't announce more QE yen will go back to 110 (maybe a good thing?). if they fdo it goes to 130 and the crony capitalists make out like bandits again.

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As someone above said, best to change your yen now why you have a chance, if you haven't already. After the QE is massively increased, the yen will drop like an elevator. Appalling.

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It's so true. The Lawson store in my locality closed down though it looked bustling apparently at night. I already witnessed schools being closed in a Tokyo ward and used as community center just for shortage of kids (according to the staffs working there). As consumer base are shrinking so the revenue graph falling, simple and natural effect. To overcome this either you have to embrace skilled immigration or move forward foreign markets. But expecting increased birth rate within Japanese people is quite unrealistic unless something revolutionary change happens in the society.

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Was at a restaurant yesterday for lunch, and they had a sign in the restroom advertising for new staff. The starting wage? Y680 per hour.

Well, that's illegal. As of October 2015, the lowest minimum wage in Japan is 693 yen, and that's in Okinawa. The national average is 800 yen. Where do you live?

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“Consumer spending has ground to a halt,”

For crying out loud, cut the consumption tax back to 5% or to the original 3% or eliminate it altogether as it was before 1989, and CUT GOVERNMENT SPENDING ALREADY!

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And stop subsidizing agri-corpse.

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This is just one of the many contradictions of capital (lower wages, greater inequality leads to reduced consumption) that is increasingly hard to manage for most countries, and with Japan's demographics it's impossible.

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Hey, they speak English on the second floor... nice.

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As for the notion of October QQE expansion, I personally do not see Kuroda going crazy like this. He will point at the crude oil price drop instead as his excuse for low consumer inflation and stock to the current pace of monetization.

Of course if I am wrong then dump the rest of your yen. But I plan to wait for a knee jerk jump in the yen before I sell more.

In any case it is a sad currency and the path is down long term, just a matter of how fast it is to fall.

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If you can't stand the heat get out of the kitchen and that is what most people are doing, not spending and one concern leads to another. Japan won't have to worry about immigration looks like the people will be migrating like the Chinese from China to other countries!!

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What I'm wondering is how can restaurant prices be so high (upwards of ¥900+) but their employees would probably need to work twice the hours to eat there. It boggles the mind.

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It's cheaper and better to eat out in Japan than in the US now.

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I am waiting for yen to hit 350 then I will consider this economic mess to be behind them.

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“Some companies are starting to realise they’ve actually driven away some customers by raising retail prices,” geez only realise this now, comon people it isnt rocket science, give people pay rises thats greater than the inflation rate and they may start to spend, otherwise things will just stay the same.

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The minimum wage in Aomori as of October 2015 is Y695, maybe the restaurant hasn't updated its sign. Regardless, Y695 per hour is ridiculous. I think the cost of living is higher here in Aomori than in Okinawa. The few times I've visited, I was surprised how food and other items seemed cheaper. Also the express road was quite reasonable, compared to the mainland.

-1 ( +1 / -2 )

It's permissible to pay under 18s and trainees less than the minimum wage, which explains why some job advertisements sometimes appear to offer less than you might expect.

Abenomics cannot work and must fail. I hope this becomes clear to more people by the time of the next election. The "arrows" of Abenomics are striking the heart of the economy, killing demand.

After all the damage caused by the consumption tax increase Abe plans to squander the revenue on LDP-supporting farmers. No surprise there, but whatever happened to reducing the deficit? Come on "journalists", grow some balls and ask the scoundrel to explain himself.

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Things are dire in Japan, I haven't seen a rise in salary for as long as I can remember. Taxes and prices are rising whilst salaries are frozen-can it get worse?

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It can and will get worse.

0 ( +1 / -1 )

Thought alarms been going off for years now.....

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