As we adapt to the struggling economy, we are forced to do something some of us never thought we would do... be frugal. Japan struggled in the 1990's to early 2000's and learned how to cope with lower wages and low stock prices. In the aftermath of their economic disaster even well-off Japanese households are resorting to conservation. For example, using old bath water to do laundry is not uncommon these days. They are also not buying cars, causing sales to fall by half since 1990. They are constantly living in fear of a repeat and focus on saving versus spending now. Japan was able to pull itself out of its slump by exporting to the US and China, but its consumers were left feeling less than confident. Per-capita consumer spending only rose 0.2% between 2001 and 2007. Japan relies on its exports, so our economy effects them as well. When we reduce our spending, and therefore imports, they are losing money. They also have to compete with other economies, like South Korea and Taiwan, where the labor costs are low. So maybe the consumer in Japan have good reason to be cautious.
Japanese consumers are now giving up the luxurious and trading it in for a more simple life. The demand for cars by men in their 20's is down 48% from 2000. Women are also trading in their Louis Vuitton for more economical purchases. The baby boomers who were expected to splurge their savings are also holding back.
The same fear that resides in the US is also occupying Japan. And that is DEFLATION. Stimulus packages may seem like a good idea in theory, but when consumers are living in fear of losing everything they have extra money isn't going to go into buying a new car, Manolo Blahniks, or a new Chloe bag. Consumers will more than likely save the extra money in hopes that it will be more valuable in the future.
Original article from NY Times:
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