”My God,” muttered the friend beside me, “it’s like Agincourt.” Opposite, just metres away, waited a mass of people, ten deep. At a given signal, we would rush towards each other, clash and trample. Some might even fall, toppling from their platform boots to graze sunbed-tanned knees unprotected by micro skirts.
Welcome to Hachiko crossing at the heart of Tokyo’s Shibuya, the favourite shopping district of Japan’s trendy young citizens. Whatever you’ve read in the papers about Japan’s economic downturn, consumer carnage takes place here most weekday eve-nings, and all day on Saturday and Sunday.
Over in Ginza – where skirts are longer, heels lower, and both generally bear a designer logo – things look much the same. At weekends, the central avenues are closed to vehicles and the streets full of shoppers. You have to wait to get into the new Louis Vuitton store, 1,230 square metres of branded luxury, where the cheapest item is a £170 business-card holder and the average spend is £430. The queues will probably be even longer at the Hermes store, expected to occupy 2,025 square metres of prime Ginza space when it opens next month.
This is what the Japanese recession looks like.
I didn’t need an expert to tell me that “Tokyo’s huge crowds of young people are bonded to conspicuous consumption and so skew the [economic] picture”, but one did anyway. Aaron Cohen, the former chief financial economist for the Daiwa Securities Group, believes that the roots of the country’s financial crisis lie deep below the surface indicators of consumer behaviour, faltering stocks and fluctuating yen.
In his view, the causes of the recession can be traced through decades of economic mismanagement, such as the government’s “time-honoured practice of pumping money into sectors noted for their political contributions, and calling it ‘public spending'”. The consequences, including a national debt that is forecast to exceed 220 per cent of GDP by 2005, “will roll over for generations”.
The extent of recent media coverage has made amateur economic analysts of us all in Japan. We gloomily discuss the “triple bear” scenario of concurrently falling yen, stocks and bonds. Predictions about the American economy’s V-shaped (sharp slowdown followed by swift improvement) or U-shaped recovery (the same, but with a flat period of minimal growth in between) are contrasted with Japan’s hapless L-shape (where recession drags on with no upturn in sight). And yet around us, people appear as well dressed and the shops as busy as ever. What kind of a recession is this?
Back in Ginza, one block down from Louis Vuitton, is the unobtrusive fifth-floor outlet of a business credited with changing the way the Japanese shop. Uniqlo is an unappealing cross between Gap and C&A. Its merchandise and store design ape the former, but with the bargain-basement feel of the latter. In 2000, it almost doubled its previous year’s sales and profits.
Cheap stores have enjoyed an increasingly high profile in recent years. The most recent retail phenomenon before Uniqlo was the everything-at-100-yen (about 58p) Daiso Plaza, still thriving with 2,000 stores countrywide. What is new about Uniqlo is its success in crossing over into the consumer mainstream. Merchandise in Daiso Plaza is functional and anonymous – kitchen utensils, cheap cosmetics, batteries and cassette tapes. Uniqlo sells only clothing, and the brand is so pervasive that there’s no chance of your basic blue polo shirt being mistaken for a Ralph Lauren.
But thrift is no longer something to be ashamed of. The word gekiyasu (“super-cheap”), once undesirable in a consumer culture obsessed with exclusivity and expense, is now a quality much touted in advertisements. Designer brands may, ironically, be receiving a boost from the gekiyasu trend (“If we want luxury goods we can save up for them by buying Uniqlo,” said a 30-year-old Yokahama woman in a recent survey of consumer behaviour). The loser is that symbol not just of Japanese consumerism, but of Japanese society itself: the department store. Five minutes’ walk from the heart of Ginza is the deserted shell of Sogo’s former Yurakucho store. Sogo went into effective liquidation in July last year, unable to hold its own in the increasingly competitive depato market.
Survivors of the store wars are resorting to various strategies to attract customers. Some renovate their premises, hold discreet sales (tastefully disguised as “boutiques” or “speciality fairs”) or expand popular basement food departments. One – Mitsukoshi’s eight-storey Yokohama branch – opened its gates to the Trojan horse and leased a floor to Uniqlo, causing an immediate upturn in profitability.
What is at stake is not so much the fate of individual stores or retail groups as the very nature of shopping in Japan. Philip Brasor, journalist and trend-watcher, says that “the public has given up on shopping as a social activity”. He attributes this to “the public’s realisation that it owns all that it will ever want”, leading it to “start comparison shopping for the things it actually needs”.
Despite a record 0.7 per cent drop in retail prices in 2000 – a drop that exceeded the two previous years of decline – people are still reluctant to spend. One simple reason is that they have less money. April’s Japan Economic Review estimated the average monthly income for a working family at 452,510 yen (£2,606), and the average consumption at 307,952 yen (£1,774); both represent a proportional decrease from the previous month. But where is the rest of the money – about £832 – going?
“We’re saving for our old age,” was the reply of Japan’s then 103-year-old twins Gin-san and Kin-san, when asked four years ago what they planned to do with income generated by their centenarian celebrity. Total personal savings in Japan exceed $11trn, the highest in the world, as is the percentage of their income set aside by Japanese savers. Despite an average interest rate of just 0.25 per cent, the Japanese are pathologically prudent.
Businesses, analysts and the government would like to see these piggy banks smashed open. The problem is that Japan’s rainy-day savers are far too good at spotting the clouds on the horizon. Job insecurity is widespread. Corporate bankruptcies, no longer rare, endanger pensions accumulated through decades of labour. One consequence of Japan’s postwar demographic is that the cautious elderly already far outnumber the free-spending young. Another is that the social security system will have to care for ever more pensioners from the contributions of ever fewer workers. The anxious middle-aged and far-sighted young are hoarding their yen in order to support themselves if the state becomes unable to do so.
Even though bank and post-office interest rates represent barely more return on your money than stashing cash in a cardboard box under the bed, the Japanese shun other forms of investment. There is no shareholding culture, as in the US, and the recent market crash has confirmed the suspicion with which such risky speculation is widely viewed. Real-estate investment ceased to be attractive after the bubble years, since when land prices have been in ceaseless free fall (last year’s 4.9 per cent slump was typical).
The comedown from the asset-inflated Eighties turned business balance sheets red, due not necessarily to failing performance, but to rapidly devaluing real-estate investments. Individual homeowners found themselves mired in negative equity, with properties worth less than the loan taken out to part-pay for them. Finally, with what Aaron Cohen calls the “banking debacle” of institutional failures from 1997 onwards, even this last safe place for savings was threatened. Opting for a more secure version of the cardboard box, anxious Japanese made the home safe, complete with burglar-proof combination lock, the surprise consumer hit of 1999 and 2000.
The whole system generates an endless downward spiral. One simplified sequence works as follows: falling land prices endanger corporate viability, which threatens jobs, causing retrenchment of personal expenditure, thereby creating further price deflation. Other strands involve stock and bond performance, Japan’s international standing and the strength of overseas competition. The shape of Japan’s “deflation” – acknowledged as such for the first time since the Second World War in the Cabinet Office’s March report – is not so much a single spiral as a DNA-like helix of interwoven chains of cause and effect. All, however, tend inexorably downwards.
The Gordian complexity of Japan’s economic plight has led some to seek an Alexander. The election on 24 April of the reform-minded Junichiro Koizumi as president of the ruling Liberal Democratic Party, and thus to the office of prime minister, gave business chiefs the leader they wanted.
The popular approval rating of Koizumi’s new cabinet, more than 86 per cent by reliable estimates, makes even Blair’s 1998 honeymoon look passionless. But Koizumi’s pet projects of post-office privatisation and reform of Japan’s parliamentary system hardly represent decisive action on the economy. True, his newly appointed finance minister is younger than the previous office holder but, at the age of 79, Masajuro Shiokawa is more old guard than new broom.
External observers look for the application of cold steel not as a sword to slice through the knot, but as a scalpel to cut away the long ingrowing sickness of Japan’s economic structure. The South China Morning Post has compared Japan to “a patient who denies the seriousness of his complaint until it becomes a matter of life and death [ . . . now] willing to submit to the scalpel of the iconoclastic new prime minister, Junichiro Koizumi”. The prognosis is not good: “Koizumi has been called in [ . . . ] after the usual medicine has failed. He will have to be something of a miracle worker to effect a cure.”
Aaron Cohen is equally sceptical: “Think of the saying ‘The operation was a success, but the patient died’. Surgically dealing with the financial sector is likely to have serious side effects.”
We should make no mistake, however. Japan remains the world’s second-largest economy, the most generous donator of overseas development aid, and, as acknowledged by other east Asian nations, the hinge of that region’s return to prosperity. The patient’s full recovery matters to us all.