Japanese Rebound Means Consumers Are Spending More

Japan, which has the second-largest economy in the world after the United States, is showing signs of life again.

Unemployment is down. Hiring of college graduates is up. And consumers are opening their pocketbooks again after a long hibernation.

“The past 10 years have been described as Japan’s lost decade,” said Keizo Tsuchiya, chief executive director of Japan External Trade Organization–Los Angeles, which organized a panel on Oct. 14 in downtown Los Angeles to talk about the country’s recent economic strides. “Did we truly lose all those years? I think not. Japan was solving its domestic problems after the bursting of the economic bubble and trying to understand what went wrong with the economic miracle.”

The country’s gross domestic product grew 2.7 percent in 2003 and is expected to increase by 4.3 percent to 4.4 percent this year because of an export-driven recovery in which Japanese flat-panel televisions, digital cameras and cars have been popular in the United States, China and other countries.

The country’s unemployment rate has declined from 10 percent a decade ago to 5 percent, still high by Japanese standards but a major improvement. More college graduates are being employed, and consumers have increased spending as the savings rate has declined from 10 percent of annual income to 6 percent. In 2003, the per capita gross domestic product was $33,720, compared with $37,756 in the United States. Japan’s per capita GDP has grown considerably since 1998, when it was $23,400, compared with $31,500 in the United States.

All this bodes well for California apparel manufacturers hoping to place their labels in Japanese stores. Many California companies are participating in the biannual Designers & Agents show in Tokyo, where U.S. designers showcase their lines to Japanese retailers.

“The first time we went over there was March 2002,” said Ed Mandelbaum, co-producer of the show, which most recently took 40 companies to Tokyo on a sales trip, compared with 20 companies two years ago. “The yen was 125 to the dollar, and everything was expensive for [the Japanese] to buy. Prices were very high, and their economy wasn’t doing well. But each time we have gone back it has gotten better. The yen is now at about 109 to the dollar. They are so into fashion and new things that each time we go it gets stronger.”

Consumer optimism

Debbie Howard, president of the American Chamber of Commerce in Japan and founder of the Japan Market Resource Network in Tokyo, noted that consumer confidence is up and the Japanese consumer is changing. The Japanese, she said, are more interested in lifestyle quality, which means they are working fewer hours and spending more time on vacation.

“The past nine months have been an exciting time in Japan. We are poised on the brink of economic recovery, and the more optimistic mood has been refreshing to say the least,” Howard said. “Also, things are better for businesses trying to enter the market in Japan. The environment is much better from a regulatory and reform viewpoint.”

Howard noted that the Japanese are more independent, having coped with a 13-year economic slump that changed the concept of lifetime employment.

“What is perhaps more interesting is not the sheer number of American businesses in Japan but the diversity of industries represented,” Howard observed. “Everything from fast-moving consumer goods to luxury-branded goods to software to health-care products to financial and insurance products.”

She also noted that with the Japanese population aging, there is a demand for different kinds of products and services. By 2025, some 20 percent of residents will be over the age of 65, compared with 12 percent of the residents in the United States.

So far, foreign-owned retailers have had mixed results in Japan. The giant French retail chain Carrefour is selling its retail operations in Japan after entering the market there four years ago. The company’s attempt to sell customers several weeks of goods did not match Japanese shoppers’ practice of buying small amounts every few days. Carrefour joins other retailers that have exited the country, including Sephora, part of luxury group LVMH Inc., and the British drug store chain Boots.

Costco Wholesale Corp. and Wal-Mart Stores Inc., however, have been making inroads in the island nation, renowned for being slow to change.