Raw Japan
Slices of Japanese business, politics and life
Deflation? Don’t blame me
The president of Aeon bristles at the suggestion that he’s partly the reason for deflation in Japan, as the country’s No.2 retailer and its rivals slash prices to snag yen-pinching shoppers.
“It’s stupid. They don’t know anything,” Motoya Okada told a group of reporters, when asked about a recent magazine article that criticised Aeon, budget fashion chain Uniqlo and other retailers for a price war that, the story argues, only hurts the economy by squeezing profits and wages.
“Japanese people are getting poorer and poorer. Unless their incomes rise, there’s nothing they can do about it,” said Okada, whose company has been marking down prices sharply to reinvigorate sales at its Jusco supermarkets and other general merchandising stores — all-in-one stores that sell everything from food to clothing to electronics.
Expressing frustration with accusations that he’s partly responsible for deflation, Okada reminisced about the good old days of barbecued eel, a traditional Japanese delicacy.
“Once upon a time, every supermarket’s fish section competed to sell barbecued eel, creating a new market,” he said.
“Before that, we could eat barbecued eel only at restaurants. But people became able to have it at home, it was a revolutionary thing. Do you call this deflation?” he said, adding that the same barbecued eel selling for around 2,000 yen at restaurants goes for about 400 yen at supermarkets.
“If we did this now, we would be accused of accelerating deflation and media would say it’s the end of the barbecued eel tradition,” he said.
Retailers do the limbo
For some of Japan’s retailers trying to jumpstart consumer spending, setting prices is like doing the limbo: How low can they go?
Japanese retailers reported mostly dismal first-half earnings results, with the industry stuck in a slump as shoppers remain reluctant to open their wallets even as the economy emerges from recession.
With no sales pick-up in sight, stores seem to have no choice but to continue their race to undercut rivals, with prices dropping for everything from cars to clothes to milk.
On the surface it sounds like a shopper’s paradise: Who wouldn’t mind paying less than 1,000 yen ($11) for a pair of jeans?
But it could also lead to a deflationary spiral in which consumers put off spending in hopes of further falls in prices.
And what’s more, these price cuts are slicing into already razor-thin profits at companies, which are then forced to pass on the pain to employees in the form of lower paychecks.
“It’s a death march,” said Junji Ueda, CEO of FamilyMart, Japan’s No. 3 convenience store chain.
It sounds like a controversy to me. By the way is The Messiah coming?!