Marketing Japan: Does Japan Suffer From Deflation? No.

By Mike in Tokyo Rogers

You know the old saying, "When your neighbor loses his job, it's a recession. When you lose your job, it's a depression."

I've been asked by a lot of people the question, "Is Japan suffering from Deflation?" Now, I'm not an economist and, in this particular blog commentary, I am not concerned here with money exchange rates, I am only concerned with the prices I pay for common goods out of my pocket.

I have been self-employed and working basically out of my home office since 1992. I do most of the grocery shopping so my data is not corrupted with tricks that government economists use to further their aims. Mine is decided using just a few things that people need for everyday living. From this, I can honestly say that my gut feeling, and from what I have seen as a common consumer, is that we are not suffering from deflation in Japan.

How do I come to these conclusions?

Let me use two specific examples that I often cite: Gasoline and the price of canned food. I am aware of what these prices were exactly in the dates I mention because, as a self-employed person, we keep strict records on all expenses at our home and office.

Gasoline and the price of fuel has something to do with everything we touch. It is important for growing food, industry and daily life. You name it, fuel has something to do with it and the price of all goods we need to live in today's world.  In the early 1990's, just as the Japanese economic bubble was bursting, the price of regular gasoline per liter was about ¥95 yen per liter. Today, August 15, 2010, it is ¥124 yen per liter. That's about a 31% price increase. That's from Shell Gasoline station where I always buy.

Canned Corn. My son loves canned corn. Why? I don't know but he loves it so much that he eats it straight out of the can (heck, what parent is not happy that their kid will eat vegetables? - he eats lots of raw veggies too!) OK is the big discount grocery store here in Japan.  I buy it by the case from OK store  in January of 2008, a can of corn cost ¥85 yen per can. Today, August, 15, 2010, it costs ¥119 per can. That's a 40% increase in price.

This increase in the price of canned foods is pretty much straight across the board.

Japanese CPI. Don't forget that, during this same period, the Nikkei 225

dropped 78% of its value.  

From what I read in the newspapers and online, deflation is dropping house and land prices in Japan... I doubt it. I think it is not deflation, I think we are still in a correction from the bad government monitary policies of the 1980's that caused the bubble, then the bad policies that still are in effect to try to prop up that bubble.

Here is an article from a guy who agrees with me about the no deflation part:

There's a lot of unfounded talk going around these days about how deflation has killed the Japanese economy...(snip)...This chart shows the year over year growth in Japan's Nationwide CPI. Since Mar. 1993, Japan's price level hasn't budged: inflation has netted out to zero. That's over 17 years of price stability. From the very peak in Japan's inflation, which was in late 1998, Japan has "suffered" an average annual decline (i.e., deflation) in its price level of 0.4%. It's hard to see how this might be the killer deflation scourge that it's made out to be.

This is not deflation in Japan, this is a painfully long correction. It will continue this way as long as the government doesn't change policies.

When I go to the store and see eggs, bread, milk, cheese, vegetables, fish and meat dropping in price and then, on my way home, I see gasoline at under ¥100 yen per liter, then I might agree with the deflationists...

This is not deflation, this is just a situation where prices are not zooming up like people had become accustomed too.

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Keywords: Deflation, CPI, bubble, Mike Rogers, Marketing Japan, Mike in Tokyo Rogers, recession, depression