Japan is experiencing a surge in tourism and investment, but the average Japanese citizen is facing a growing gap between rising prices and stagnant wages. This article explores the disparity between the booming economy for outsiders and the everyday struggles of Japanese residents.
A Tourist and Investor Paradise
Kyoto’s iconic autumn foliage is drawing record numbers of foreign tourists, creating a spectacle of vibrant colors and bustling crowds. The influx of visitors has become so significant that authorities are contemplating restrictions, similar to those implemented in Venice. Airports are overwhelmed by the sheer number of arrivals, with South Korea alone sending over 20,000 tourists daily.
The falling yen has transformed Japan into a haven for budget-conscious travelers. While luxury experiences remain available in Tokyo’s Ginza and Osaka’s Shinsaibashi, affordable options abound. A bowl of rice and chicken can be enjoyed for a mere NZ$5, a Big Mac for $6.60, and a fresh cup of coffee from a convenience store for a mere $2.
Investors are also enthralled by Japan’s economic resurgence. The Tokyo stock market has soared by 31% in 2023, and housing prices in major cities are experiencing a remarkable surge after decades of stagnation, rising by 20% since the end of 2020.
The weak yen is a boon for exporters. Toyota, the world’s largest car manufacturer, has reported a record profit of US$17 billion in the six months leading up to September.
The Economist has hailed Japan’s resurgence, calling it a “long-awaited opportunity to rise again.”
The Other Side of the Coin: A Struggling Middle Class
While the economy appears robust on the surface, the average Japanese is experiencing a different reality. The country’s decades-long struggle with deflation continues to cast a shadow on the economy, despite recent signs of inflation. The Bank of Japan remains cautious about raising interest rates, maintaining an ultra-low interest rate policy.
Years of economic stagnation have resulted in wages significantly lower than those in comparable economies. Nominal average salaries in New Zealand are now 50% higher than in Japan. The minimum wage in Tokyo is just over Y1000 (NZ$11.20), a stark contrast to the NZ minimum wage of $22.70.
Economists and officials are optimistic that the return of moderate inflation will stimulate a virtuous cycle of price and wage growth. However, for the moment, Japanese consumers are grappling with rising costs of living and surging housing prices while their incomes lag behind.
Stories From the Ground: Everyday Struggles
Ayako Saito, a housewife living outside Tokyo, observes the ongoing construction projects in her area, but feels no personal economic improvement. Her husband’s wage increases have failed to keep pace with the rising costs of petrol, electricity, and groceries. She expresses concern about the future of government pensions and the economic prospects of her children.
Kikumi Suda, a professional woman living in Kanagawa, notes that the government claims wages have increased by 2% this year, but she sees no evidence of this in her own life. While her partner works in a large corporation, she has chosen to work part-time as a contractor, enjoying the flexibility but sacrificing the job security and wage growth enjoyed by full-time employees.
Suda expresses deep concern for young people, who are graduating with substantial student debt and entering a job market with plentiful opportunities but low salaries. She attributes the trend of later marriages and fewer children to economic uncertainty, with young people citing financial constraints and the perceived difficulty of raising a family.
A Nation in Transition: Seeking a Path to Prosperity
While many of these economic challenges are shared by other developed countries, they are particularly acute in Japan, given its descent from its economic peak just 30 years ago.
Despite its past prosperity, Japan’s average real incomes now rank below the OECD average. Even when adjusted for lower prices, Japanese incomes are lower than those in New Zealand.
Housing affordability is emerging as a major concern in Japan. The country’s real estate bubble of the 1980s was followed by three decades of declining property values. However, recent years have witnessed a resurgence in housing prices in major cities.
Foreign investors are drawn to Japan’s undervalued assets, pouring money into the Tokyo stock market and purchasing apartments and commercial real estate. The country’s stability and its proximity to China make it an attractive alternative for investors seeking diversification.
A Government Under Pressure: Balancing Acts and Unfulfilled Promises
The Japanese government, under Prime Minister Kishida, is facing intense pressure to address the rising cost of living. Public opinion polls indicate that 60% of voters believe their economic situation has worsened in the last two years.
In response, the government has proposed a combination of long-term tax increases to improve the fiscal balance and short-term one-off tax cuts to stimulate consumption. A lump-sum payment of NZ$450 will be distributed to all taxpayers next year, with higher amounts for low-income families.
The government is also encouraging businesses to share the benefits of the weak yen with workers by raising wages. Rengo, Japan’s largest trade union confederation, is pushing for a minimum wage increase of 5% next year.
Large corporations are already responding to a worsening labor shortage by offering significant wage increases. However, the extent to which these increases will trickle down to smaller and medium-sized companies, which constitute 70% of Japan’s economy, will be crucial to the direction of the economy and the fate of Kishida’s popularity.
A Nation in Search of Balance: Hopeful Visions, Uncertain Realities
Despite the recent economic boom for tourists and investors, the average Japanese citizen remains cautiously optimistic about the future. The government’s promises of increased wages and tax relief are met with a healthy dose of skepticism. The question remains: will these measures translate into tangible improvements in the daily lives of ordinary Japanese citizens?
Time will tell whether Japan can successfully navigate this complex economic landscape, achieving a balance between its potential for prosperity and the needs of its citizens.
