News

Japan: A Deflation That Refreshes

The Japanese government hopes to jar the economy out of a quarter-century long deflation through unprecedented monetary stimulus, government spending and business deregulation.

But there's at least one stubborn holdout: soft drinks.

They're cheap and getting cheaper. Why?

There's a price war between Japan's ubiquitous vending machines and supermarkets. Atop a vending machine in Tokyo are the words, "Cheap is Normal."

Here's more from a Dec. 14 Bloomberg article:

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." …

About one in three vending machines offers reduced prices, according to Tokyo-based beverage researcher Inryou Souken.

You can read the entire article by following the link below: http://www.bloomberg.com/news/articles/2015-12-14/abe-deflation-fight-has-foes-on-nearly-every-street-corner

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