by Tim Kelly and Chris Gallagher
TOKYO (Reuters) – Hiromichi Akiba has started replacing beef with chicken at his low-cost Tokyo supermarket, with customers switching to cheaper meats as inflation erodes consumption in the archipelago.
Japan unexpectedly entered recession in the fourth quarter, with domestic demand, which accounts for more than half of the country’s economy, running out of steam.
By decreasing by 0.4% last year, the Japanese economy fell behind that of Germany, which became the third largest economy in the world behind the United States and China.
Hiromichi Akiba is not in his first recession, having opened his store in 1992, when Japan was in complete stagnation after the end of the economic boom. The current situation, however, is much more serious, as inflation and the continued depreciation of the yen lead to rising labor, transportation and energy costs that are difficult to pass on to customers.
“Customers used to come knowing what they wanted to buy, but now they buy what is cheap,” he explains, amid baskets of quartered Chinese cabbages for 48 cents. euros and broccoli crowns for 62 cents.
Japanese retailers are “at war” with each other to attract customers, he added.
Retail giant Aeon also said it was noticing customers’ acute sensitivity to price increases, with its chief strategy officer Motoyuki Shikata telling analysts last month that he was seeing significant “fatigue” among shoppers being asked to pay more.
The impact of inflation contrasts with the boom in Japanese stocks, with the Nikkei index at a 34-year high. The weak yen has made stocks more attractive and helped boost profits for exporters, such as automaker Toyota.
Harumitsu Moriyasu, one of Hiromichi Akiba’s regular customers, doesn’t expect consumers’ plight to improve anytime soon. One year from retirement, this worker employed in the social sector wonders if his pension will be enough.
“The United States and China are more populated than Japan, so it makes sense that their economies are larger, but Germany has a smaller population. So the situation must be serious” for its economy to have surpassed that of Japan, he concludes.
(Reporting by Tim Kelly and Chris Gallagher, Corentin Chappron, editing by Zhifan Liu)
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