Recent Trend of “Saving”, “Benefit” Is The Indulgence in Consumption ~Story 1: Not All of People Have Been Straitened!~

The recent worldwide economic recession has lowered business results, mainly, of the export-oriented industries. As more than half of Japanese people have been financially straitened unavoidably, private consumption has become truly sluggish. This report, however, will examine the private consumption of the rest of Japanese people, who have not been straitened at all.

Keiko Wakahara

Keiko Wakahara Columnist

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■Private consumption is quite dominated by saving mood. However, not all of Japanese people have become straitened.
Saving is in fashion these days but not everyone is actually compelled to lead hard time in their living. According to a “YOMIURI Shimbun” poll, 54 % of the respondents complained of being straitened in life circumstances now, compared with a year before. The percentage jumped up from the December 2006 figure of 25% for the same questionnaire (Fig.1). This figure is the second highest only after 59 percent in February 1980 just after 2nd Oil Crisis. 78 percent of the respondents felt uneasiness about their own and family’s jobs now and in future. 68 percent reduced spending, compared with a year before. The reasons for reduced spending include; “no hope for income increase (58 %)”, “concerns for their old ages, including the amount of pension they will receive, health care and nursing care (48 %) ” and “hardly feel comfort in life (47%)”.

More than half complained of being financially straitened. In fact, many companies in the export-oriented industries, such as automotive or machinery, have cut down wages and bonus, lay off temporary employees and even terminated employment of some workers. Some of the Japanese companies were so strained as to have their wages reduced and lose the jobs.

In the meantime, the survey revealed that 46 percent people were not feeling financially straitened. 43% of the respondents find their present life circumstances “unchanged” compared with a year before, 0.6% “better-off and 2.2 % “somewhat better-off”. On the other hand, 78 percent have a concern for their future life.

This report will further examine the behaviors of the people who are not financially straitened.

Fig-1 Life Circumstances compared with a year before(The YOMIURI Poll all over Japan at April, total answer 1,810)
Fig-1 Life Circumstances compared with a year before

The Japanese families are segmented by the level of their family expenses from “the wealthiest layer who can spend money just as they want)”, “the relatively wealthy layer who can purchase any goods and services they want but with some restriction on amount and timing” to “the layer who cannot afford to by buy what they want because of a priority payment on a housing loan”, “The layer which compelled to lead hard time in their living without steady income” (Fig.2). The price of “Things they want” differs in wide range from cheap to expensive. The wealthier the layer is, the higher the price of items they want.

There is not complete correlation between affluence of the family budget and the amount of annual income. Some pensioners are quite wealthy with affluent financial assets, while some high income earners may not have a large amount of disposal income as they have to pay a large amount monthly on home loans.

This is apparent when you think of a family already paid off their home loans. They can afford to spend on what they want with the money they used to allocate for the loan payment. Suppose the payment used to be 100 thousand yen per month for example, the family can afford fancy clothes or one day trip or going to the theater instead of its payment.

Today’s consumers tend to buy the food in the grocery stores rather than department stores and choose the economical private brand than national brand.

At department store, the sales of cosmetics, which had kept growth hardly affected by recession before, started to decline from December 2008. Even the sales of confectionery, the only product category that kept growing since 2007, fell into negative growth in February 2009.

The winners today are UNIQLO (low priced clothing retail) and NITORI (low priced furniture shop), both of which offer quality products at low prices.

Let us summarize how consumers behave in an economical recession?
When layoff of workers and cut down of the salary occur, people begin to feel great anxiety toward their employment and their future and their consumption shrinks with following behaviors;
1. Sorting their wants into what they still feel justified to spend their money and what they don’t
2. Reducing the consumption of items that can be alternated by something else that is cheaper
3. Choosing lower priced products
4. Changing their shopping behavior to what they can do without much patience and sacrifice;
a. Using discount coupons, or point cards
b. Purchasing at the outlet stores or discount stores.
c. Shopping at discount timing; bargain sale or time sale

Mentioned above are the behaviors of the people when they are financially straitened. Today even the wealthy people have begun to follow such saving mood of financially straitened people.
The people whose income has not decreased are now reducing private consumption. This tendency is likely to magnify the recession at the moment.
Fig-2 Family Budgeting Ranking Image
Fig-2 Family Budgeting Ranking Image