Inflation Is Hitting Japanese Households Hard

Consumers Shopping Ahead of Japan's Retal, Household Spending And CPI Figures
A customer reaches for laundry detergent at a drugstore in a shopping arcade in Tokyo, Japan, on Monday, March 23, 2015. Bank of Japan Governor Haruhiko Kuroda last week prepared the public for the potential return of falling prices, while expressing confidence any such declines would be temporary as policy makers keep up their battle to foster inflation. Photographer: Kiyoshi Ota/Bloomberg

Prime Minister Shinzo Abe came to power vowing to drag Japan out of deflation and stagnation. His logic was that rising prices would drive higher salaries and increased consumption. More than two years on, prices are rising, but wages adjusted for inflation have sunk to the lowest since at least 1990.

A record 62 percent of Japanese households described their livelihoods as "hard" last year in a survey on incomes. A sales-tax increase in 2014 helped drive up living costs faster than wage gains.  At the same time, the Bank of Japan's quantitative easing drove down the currency, boosting the cost of imported energy.

This is making fresh food and other daily necessities more expensive, according to Yuichi Kodama, an economist at Meiji Yasuda Life Insurance Co. in Tokyo.

The survey on livelihoods gave respondents three possible choices to describe their income situation: Hard, Normal or Comfortable. To rev up consumer spending, which is about 60 percent of the economy, more people will need to start feeling comfortable.

 

Before it's here, it's on the Bloomberg Terminal. LEARN MORE