Thanks to a Shopping Spree, Japan Is Looking Up. It May Not Last

Japan’s long-sluggish economy has found its spark. To keep it flickering, Japan needs to find more big spenders like Sayaka Sakata.

Ms. Sakata, a 49-year-old mother of four, recently moved to a rented house from an apartment in the city of Yokohama after her husband got a new job. That meant buying new stuff: a washing machine, a refrigerator, some appliances and even a used car. Saving, she said, was no longer her top priority.

“I’m an optimistic person,” she said. “I think spending money on my family is more important.”

The unexpected surge in economic growth reported in Japan this week was thanks in large part to an unexpected source: Japanese consumers.

Long known as aging penny pinchers, Japanese shoppers in recent months have decided to spend. Data showed they bought more cars, air-conditioners, television sets and other appliances during the three months that ended in June, fueling an unusually high annualized growth rate of 4 percent.

The results are good news for Shinzo Abe, Japan’s prime minister, who has been hit by political setbacks and who can claim results for his economic policies. Widely known as “Abenomics,” Mr. Abe’s policies call on the country’s central bank to flood the economy with money, lowering the cost of borrowing and encouraging companies to spend.

But the June quarter results have left many economists scratching their heads. Despite low unemployment figures and a year and a half of slow-but-steady economic growth, worker pay in Japan has been mostly stagnant. Overall wages fell in June compared with a year ago, according to official data.

This week’s figures could suggest paychecks will start to rise and Japan’s consumers are feeling better. Or, economists say, the figures could be a fluke, leaving Japan to keep looking for ways to escape its slow-growth rut.

“I don’t think this is permanent consumption,” said Kozo Ueda, a professor of political science and economics at Waseda University in Tokyo. “I think it’ll decrease in the next quarter because the figures in this quarter are too strong.”

Japan faces many of the same problems that the United States and other developed economies are dealing with. Despite steady economic growth and falling unemployment since the darkest days of the global financial crisis, wage growth in many countries has remained stubbornly low.

The figures suggest workers in many countries have not widely benefited from economic expansion, hurting their confidence and keeping them from spending more. The potential reasons include a mismatch between worker skills and the jobs that are available; shifts in the nature of work; and low productivity growth, which makes employers reluctant to raise wages.

Japan has particularly vexing problems when it comes to wages and consumer spending. The population is aging and shrinking as more Japanese households have fewer babies. That reduces demand for everything, including cars and houses, and contributes to falling prices, a phenomenon that makes spenders hold back even more as they wait for prices to fall further.

When workers retire, Japanese companies often replace them with temporary workers, who make less than regular hires, depressing wages even more. Temporary workers, like freelance or contract workers, make up about one-third of the country’s work force.

“There’s still question marks all over wages,” said Rob Carnell, chief economist and head of research for the Asia-Pacific region at ING, the Dutch bank.

Shopping in Tokyo in June. Japanese consumers spent heavily during the three months that ended in June.© Shizuo Kambayashi/Associated Press Shopping in Tokyo in June. Japanese consumers spent heavily during the three months that ended in June.

Despite those headwinds, Japan has in recent months showed signs of a modest revival. In addition to rising economic growth and output, unemployment just hit a 21-year low and the stock market has risen along with financial markets around the world.

That has left some workers feeling confident. Jimmy Yoon, for example, just bought his dream car: a Jeep Wrangler sport utility vehicle.

The Jeep will not be cheap. Mr. Yoon, a 26-year-old South Korean living in Japan, has committed to paying $1,000 a month for the next three years. But he just got a job in logistics in Tokyo at an e-commerce company and his stock investments are beginning to pay off.

“I’ve been working on my stocks since university, and I’ve actually been aiming to get a car since when I was 21 years old,” Mr. Yoon said. “That was the final goal, to get the money.”

A new job also gave Mika Funaba, 26, new confidence. Last year, while working in hospitality, she was reluctant to spend. But then she got a position in a Yokohama salon as a beauty therapist specializing in eyelash extensions. Feeling more secure, she recently spent about $3,000 on improving her teeth and took a trip to the Philippines.

Of her new, $4,500-a-month income, Ms. Funaba said, “I know that it will never go down, but it won’t necessarily go up.”

Still, economists say the consumer sales rise could be explained by more temporary factors.

For one, several different kinds of durable goods have reached the end of their life cycles, said Professor Ueda of Waseda University. Six years ago, Japan ended analog TV service, prompting demand for flat-screen TVs. And the government has encouraged the purchase of environmentally friendly appliances.

The key to wage growth may be productivity. Franz Waldenberger, director and chief economist of the German Institute for Japanese Studies in Tokyo, says low unemployment will not result in significant wage increases by itself.

Wages could rise if productivity does, he said, and “that would be an excellent performance given the demographic condition of an aging population.”

Still, Ms. Sakata of Yokohama said that she has reason to believe the good times will stick.

“I remember four years ago reading a lot about young graduates finding it hard to get a job,” she said. “Now I don’t really see that anymore. I’ve encouraged my 21-year-old son, who’s studying in Australia, to come back to Japan because the job market looks good.”

By THISANKA SIRIPALA

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