Abe Deflation Fight Has Foes on Nearly Every Street Corner

Japan's ubiquitous vending machines locked in a price war

Tokyo Vending Machine

A vending machine proclaims "Cheap is Normal!!! 100 yen". Tokyo, Japan, on Tuesday, Nov. 17, 2015.

Kevin Buckland/Bloomberg

They stand resolutely on street corners around Japan, proclaiming that deflation has not been vanquished, much as the Abe administration and the central bank have tried.

They are the country’s 5 million vending machines, and as anyone who has visited can attest, they are seemingly everywhere: from the capital’s vast network of train and subway stations, to Kyoto’s historic shrines and temples, to Okinawa’s remotest islands, and even on Mount Fuji. At about one for every 25 people, Japan has the most vending machines per capita in the world -- double the rate of the U.S.

Now these symbols of convenience have become ensnared in a war with supermarkets and discount retailers over the price of soft drinks, which government data shows is at the lowest since 1976. Acting like cast-iron billboards for falling prices, their ubiquitous presence compounds the challenge faced by Prime Minister Shinzo Abe in trying to reverse the populace’s ingrained deflationary mindset.

“There’s a great many people who are still attached to the idea of low prices,” said Takeshi Minami, an economist at Norinchukin Research Institute in Tokyo. “It’s deeply rooted.”

Bank of Japan Governor Haruhiko Kuroda has stressed repeatedly since launching unprecedented monetary stimulus in April 2013 that in order to exit deflation, it’s crucial to boost inflation expectations. He even invoked Peter Pan in a speech before central bankers and academics at a BOJ-hosted conference in June: “The moment you doubt whether you can fly, you cease forever to be able to do it.”

Far from soaring, household consumption has fallen in every month except four since the start of 2014, frustrating Abe’s goal of reviving the economy with a burst of consumer spending.

A can of of regular Coca-Cola soft drink sits on display for sale in a vending machine in Tokyo.
A can of of regular Coca-Cola soft drink sits on display for sale in a vending machine in Tokyo.
Photographer: Kevin Buckland/Bloomberg

About one in three vending machines offers reduced prices, according to Tokyo-based beverage researcher Inryou Souken. That’s even after a consumption-tax increase in April 2014 brought the benchmark cost of a 350-milliliter soft drink to 130 yen ($1.07) from 120 yen, where it had been stuck since the late 1990s. At one machine at the main intersection of Tokyo’s swanky Shirokanedai neighborhood, a 500 milliliter super-size can of Coca-Cola now sells for just 100 yen, or the equivalent of 82 cents.

With the economic recovery still fragile, budget-conscious consumers are increasingly packing drinks from home when they go out, and when they purchase them, they tend to do so at supermarkets and convenience stores offering deep discounts. That pressures vending machine operators to lower prices, according to Tokyo-based Yano Research Institute Ltd.

Ironically, Abe’s predicament is the result of things that nations would normally be proud of: an extremely low crime rate and a famously efficient public transportation system. Perhaps only in Japan could so many vending machines line commuter routes and train platforms, virtually free from the risk of vandalism.

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