Hope fizzles for Japan's 'revenge spending' splurge as inflation looms

straitstimes.com -- May 02
Japanese mother of three Maiko Takahashi was never one to pinch pennies or accept hand-me-downs for her children even though circumstances for her single-income family have always been fairly modest.

But times have changed. Nowadays, she has no trouble with used clothes and her pursuit of bargains and scrimping on the most trifling costs borders on the obsessive.

"I've started to pay close attention to tips on TV shows, like minimising the number of times you open the fridge to save electricity," said Takahashi, whose family of five lives in suburbs north of Tokyo.

"We've started to feel the pinch going about things the usual way so I've made adjustments." Takahashi's behaviour is mirrored by a growing number of consumers and underlines a worrying trend for Japan.

After lifting two years of on-and-off coronavirus curbs in March, the government was counting on what's known as "revenge spending", pent-up demand triggering a splurge that boosts consumption and a moribund economy, as has been seen in the United States, China and some other major economies.

But with energy, food and other living costs soaring - exacerbated in recent months by a sharp decline in the yen and the war in Ukraine - those hopes are fading fast.

Facing the prospect of struggling with rising prices, Japan's famously thrifty consumers are tightening their belts even as they sit on the remains of an estimated 50 trillion yen (S$530 billion) - equivalent to 9 per cent of the economy - in "forced savings", as the Bank of Japan calls it, accrued during the pandemic.

Some bigger companies have answered a government call to raise wages but the gains of some 2 per cent will be swallowed up by higher prices of everything from flour, to diapers and beer, economists say.

In March, electricity prices in resources-poor Japan jumped 22 per cent from the previous year - the most in more than four decades. ...continue reading