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BBC World Service

Japanese consumers paying more for stuff, and that’s a good thing?

Roland Buerk May 27, 2011
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BBC World Service

Japanese consumers paying more for stuff, and that’s a good thing?

Roland Buerk May 27, 2011
HTML EMBED:
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JEREMY HOBSON: Here in the U.S. economists would be more than happy if gas and food prices came down a bit. That would give consumers more confidence and provide a boost to the economy. But in Japan today economists are cheering news that the opposite has happened. Consumer prices rose by six-tenths of a percent last month — that’s the first increase in two years.

The BBC’s Roland Buerk is with us now from Tokyo with the details. Good morning.

ROLAND BUERK: Good morning.

HOBSON: So is this all earthquake related? The reason consumer prices are rising?

BUERK: It’s certainly partly earthquake related. The earthquake and the tsunami of course knocked out some of Japan’s nuclear power. That means the country’s had to import more fuel. And of course oil prices have been going up. There are some other reasons though. A year ago, the government made changes to the amount that people had to pay for high schools. That distorted the figures then. It’s now worked to the system so we’re seeing this rise in prices out today.

HOBSON: And why has deflation been such a problem in Japan for so many years?

BUERK: The underlying problem in Japan is that the country is getting older. More and more people are retiring so there’s downward pressure on wages. I think the other thing is that it really becomes a habit for people. You know, companies start to pander to people’s needs to pay less. McDonald’s for example introduced a 100 yen — just over $1 — menus a few years ago. There’s a battle between companies to make jeans for the cheapest possible price. You can buy a pair of jeans for about $5 now in Japan. Once you’re in that downward spiral, it’s very hard to pull out of it.

HOBSON: Well, are people excited that prices are finally rising after all these years?

BUERK: They certainly don’t seem to be. I think perhaps because the government is saying that this is just a blip. They’re not saying that deflation has been beaten. They just say that in this month, because of these unique circumstances, prices have risen. But the ongoing battle that’s been going on for years now to beat deflation — that’s still going to have to be fought over the months to come.

HOBSON: The BBC’s Roland Buerk in Tokyo. Thanks Roland.

BUERK: Thanks very much indeed.

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