Wednesday, September 22, 2010

¥10 Yen Shops in Japan! Proof of Deflation!

The Asia Times Online shows what 20 years of Japan's economic policies have brought us: Severe deflation.

Now, we have ¥10 yen shops selling daily items and doing brisk business in Japan. Ten yen is about 8 cents. The ¥10 yen shops sell loss leader items to attract the customers but the other items sell for about ¥88 each, so they even beat out the ¥100 yen shops.

¥10 yen shop in Yoyogi in Tokyo!

The store that accomplishes all of this is called the Recycle Garden and you can see their webpage here

As the Asia Times Online reports:

At Recycle Garden, 10 yen buys the customer everyday items such as chopsticks, kitchen goods, nail-scissors, hand sanitizers, or air fresheners. A colored plastic hair clasp is also

10 yen. In the Kawasaki shop alone, the product lineup consists of about 1,000 items at 10 yen, with the number of goods totaling around 30,000. It's all there. 

Surprisingly, most of those products are made in Japan, not in China, Vietnam or Cambodia, from where usually cheaper and lower-quality goods flow into Japan.

How does Recycle Garden achieve these super low prices? Interestingly, they buy up goods from bankrupt shops and other bankrupt ¥100 stores!

The article continues:

The mechanism is this: amid an increasingly fierce pricing war among neighborhood retail shops such as 100-yen convenience stores, Recycle Garden makes bulk purchases of those goods from bankrupt shops and firms as from deceased manufacturing and wholesale merchants. In most cases, on hearing the news about a bankruptcy, Recycle Garden workers dash to the failed firms with large dump trucks, and buy up and take away immediately to their chain store a vast amount of goods.

"We are cutting prices to the bone," said Tadafumi Fukuda, 41, manager at Recycle Garden's Kawasaki outlet. "Since we also sell other items at 88 yen and above, 10-yen goods serve as a crowd puller." The number of customers visiting the shop has increased 20% from a year ago, when the shop started to sell 10-yen goods, he said. 

Of course, if the economy were good, then they could never do this business plan of cannibalising other discount shops, but as long as the Japanese government keeps up with the stupid policies that we've had over these past twenty years, then it certainly won't be just, "Japan's Two Lost Decades" It will certainly turn into, "Japan's Lost Three Decades."  


Keywords:  ¥10 yen shop,  ¥100 yen shop, deflation, Recycle Garden, Marketing Japan, Mike Rogers, Mike in Tokyo Rogers


ben said...

This is a fascinating blog and I am glad that I stumbled upon it. I am curious, however, what you would do if you were in charge?

You claim that Japanese policies over the past 20 years have led to the situation and that something needs to change. The problem, of course, is that deflation is incredibly pernicious and not easily resolved.

The Japanese have become deflated over the past 20 years for good reason. Kudoka has gutted millions of jobs and the lack of population growth means less consumption among the youth.

So what exactly would you do?

mikeintokyorogers said...

Dear Ben,

Thanks so very much. There is no easy way out. The Japanese government should not have printed money to try to float the banks and the economy after the bursting of the so-called "Bubble." Of course you remember the term, "Zombie Banks"?

If the free market were allowed to operte without government interference, then those entities would have gone bankrupt and we could have cleared out these bad debts long ago. But with government pump-priming and the printing of trillions of yen, they've not only succeeded in creating this deflatioanary spiral, they've destroyed people's savings.

The government must stop the creation of money out of thin air and get out of the business of dictating to the market what the interest rates are. Let the free market decide the interest rates and you will see an end to deflation very quickly.

Plus, I'd also cut all government bureau's budgets by 30% and freeze all public pension plans.... Just to start.

I might allow foreigners to come to work in Japan, but that would get me kicked out of office real fast.

Thanks Ben!

mikeintokyorogers said...

In a twist of amazing timing, Mish writes about this very same subject today (please copy and paste):