In case you managed to miss it, Japan has taken a huge fall in its relative economic standing by more or less standing still for almost a generation. The comparative fall is 30%. And even though visitors to Japan do not see the superficial signs of distress (infrastructure is well maintained, people are neatly dressed, restaurants, bars, and tea houses look busy), the consumer has retrenched to a degree that (now) seems unimaginable to the US.
The big reason Japan has had a high savings rate is the lack of Social Security or tax-advantaged retirement plans, plus families are more nuclear than in other societies (i.e., less reliance on extended families). But a second reason is the extreme instability of employment among the young. Many are so-called “freeters”, or basically long-term temps, doing low level work for employers, the first to be fired, and little hope of advancement even if they do wind up staying with the same company a long time. This is not only materially difficult, but psychologically hard, since Japan places great standing on group membership.
The examples from this New York Times story are revealing:
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.
The Takigasaki family in the Tokyo suburb of Nakano goes further to save a yen or two. Although the family has a comfortable nest egg, Hiroko Takigasaki carefully rations her vegetables. When she goes through too many in a given week, she reverts to her cost-saving standby: cabbage stew.
“You can make almost anything with some cabbage, and perhaps some potato,” says Mrs. Takigasaki, 49, who works part time at a home for people with disabilities.
Her husband has a well-paying job with the electronics giant Fujitsu, but “I don’t know when the ax will drop,” she says. “Really, we need to save much, much more.”…
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.
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.
They tend to be uninterested in cars; a survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales.
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.
“I’m not interested in big spending,” says Risa Masaki, 20, a college student in Tokyo and a neighbor of the Takigasakis. “I just want a humble life.”…
“My husband is retiring in five years, and I’m very concerned,” says Ms. Masaki’s mother, Naoko, 52. She says it is no relief that her husband, a public servant, can expect a hefty retirement package; pension payments could fall, and she has two unmarried children to worry about.
“I want him to find another job, and work as long as he’s able,” Mrs. Masaki says. “We must be ready to fend for ourselves.”
Perhaps I am wrong, but my impression is Americans understand frugality borne of real or near poverty but are less able to identify with middle class desperation. But studies have also found that happiness is correlated strongly with relative rather than absolute economic standing, that is, someone would be happier earning $100,000 in a community where the average income is $75,000 than they would earning $150,000 in a community where the average income is $200,000. Since Japan has very little income disparity, the fact that the belt-tightening is widespread no doubt makes it somewhat easier to bear. I do not know how well America would bear up if we had a long period of Japanese style austerity with the big differences we have between the bottom, middle, and top echelons.
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You forget to mention that consumers in Japan are punished for spending. In order to pay for the pork-barrel stimulus after the property bubble popped, the sales tax paid by consumers has been raised several times. They are also lack access to credit, in a fashion that U.S. consumers are only now becoming familiar with. While credit cards are common here, the Japanese mostly have debit cards or equivalent schemes based on their cell phones.