Inflation is finally catching up with Japan, via Netflix and Apple
TOKYO – Despite growing fears of inflation in the rest of the world, consumer prices and wages in Japan have both stubbornly resisted upward pressure for decades.
Yet cracks are starting to appear as foreign companies from Netflix to steelmakers shine a light on how Japan’s deflationary spiral could hurt both its consumers and its businesses.
“It’s just a little expensive,” grumbled a Tokyoite in February in response to new monthly subscription fees announced by Netflix.
The video streaming giant reviews its prices roughly every two years. Its most recent update increased the standard monthly subscription in Japan by 13% to 1,490 yen ($ 13.44) and in the United States by 8% to $ 13.99, bringing prices worldwide. about the same level.
The move represented a break with the usual pricing schemes of global companies, which tend to charge Japanese customers less.
For example, Amazon.com charges $ 119 in the US and 79 pounds ($ 110) in the UK per year for the Prime subscription. The same perks, which include free videos and shipping, cost 4,900 yen, or $ 44.50, in Japan.
Universal pricing around the world is hurting customers based in countries where wages have stopped rising. Japan is a prime example, with real wages down 9.7% last fall from their peak in 1997.
U.S. wages rose 22.2% over the same period, while British and South Korean wages jumped 29.7% and 57.9%, respectively.
The relative cost of iPhones shows how stagnant wages can squeeze consumers in affected areas. The iPhone 12 Pro Max with 512GB of memory, which is the best-equipped model currently available, costs around 45% of the average monthly salary in Japan. In the United States, it costs only 25% of the average monthly salary.
One clue to what might be in store in the future is the particular price readings for industrial materials. Hot-rolled steel sheet prices, for example, are 10-20% more expensive in overseas markets. It was practically unheard of ten years ago.
“Deliveries are 30-40% shorter than usual,” said a Tokyo-area steel processor. “We cannot buy [steel] in sufficient quantities because steelmakers favor exports.
Hot-rolled steel was selling for around $ 1,015 per tonne in Southeast Asia in the second half of June. It is natural to favor foreign buyers, who will immediately buy at a higher value, over domestic buyers who tend to haggle.
The divergence between domestic and international prices is fueled by the fact that Japanese companies are in a bad position to raise final prices on Japanese consumers, who display strong deflationary attitudes.
The business goods price index stood at 103.9 points in May, up 4.9% from the previous year, the largest increase in about 13 years.
Yet the consumer price index, excluding fresh produce, only rose 0.1% last month, marking the first positive year-over-year change in 14 months due to the recovery. crude oil.
This shows a large gap between company prices, which depend on global demand, and consumer prices, which are governed by internal demand. Despite this development, companies are not in a position to pass on the additional cost of their products.
Instead, companies are cutting back on labor expenses to offset the additional procurement costs. This shifted the burden on workers, especially non-regular employees.
As a result of this trend in the labor market, consumer spending has struggled to grow and corporate profits have become sluggish, forming a vicious cycle.
“If the current structure remains in place, it will be difficult to raise wages for the whole company,” said Rikio Kozu, president of the Japan Confederation of Trade Unions, the main union known as Rengo.
A multinational company normally raises the prices of products to match the value added, which in turn results in higher wages. Japan’s “Galapagos” economy – where business sectors tend to focus solely on the needs of domestic users – has so far resisted this calculation. But global inflationary pressures, as Netflix attests, are quietly changing the game.