Monday, August 31, 2015

Japan is super expensive, right? Actually...

Shibuya station

For a long time, the consensus has been that Japan is an expensive place. That was easy to go along with back in 1990, when Japanese investors had the money to buy overseas properties like the Pebble Beach golf course. Tales spread about 10,000 yen watermelons (which do exist) and many people assumed that even a brief stay in Japan would break the bank. There may have been some truth to that 30 years ago. But how costly is the country these days?

Well, it's a mixed bag. You still have goods and services that are as expensive as they were during the bubble years. But there's a growing basket of things that are becoming cheaper, either because of decades of deflation or due to low-cost competition. Let's break it down.

(More after the jump:)

Legacy Prices

I wasn't in Japan in the 1980s. but I've heard a lot about the Golden Years "when the money kept rolling in." There are plenty of stories of people taking taxis to work, tossing perfectly good appliances to buy new ones, and the like. I imagine daily life wasn't cheap. With companies providing lifetime employment and people making it rich off the stock market, high costs of living (and high-flying lifestyles) seemed sustainable.

Then in 1990 the stock market bubble popped (as did the real estate bubble shortly thereafter), the economy sputtered, and deflation set in. Decades later, the ship still hasn't managed to right itself. For a lot of goods and services, prices became cryogenically stuck in slots. And, after all this time, some things are still very expensive.

Take business cards. A couple of years ago, I asked about getting some made at a shop and was floored at the cost - 4,000+ yen for a box of two-sided, full-color cards. (I understand there are probably places out there that may do it cheaper, but there are just as many others with high costs.) Then there are things like stationery, which costs a ridiculous amount at traditional shops.

In terms of transportation, costs are very high compared to most places in Asia. Bullet trains within Japan are more expensive than LCC flights between countries. Local transportation, including trains and buses, is far more expensive than what you'll pay elsewhere. If you take a taxi a short distance (just a few kilometers) you'll be all right - less than 2,000 yen. But take a longer ride, and the cost will lead to much wringing of hands, gnashing of teeth, and emptying of wallets. Some travelers don't know this, or they get stuck at an airport or a far-off place and wind up spending 15,000-20,000 yen to get to their destination.

What once was expensive...

Interestingly, with prices stuck for more than 20 years, some things that once seemed expensive don't anymore, simply because so many other countries have caught up to (or surpassed) Japan's costs. One example is hotel rooms. By and large, it's now cheaper to rent a room in Tokyo, Osaka, or Nagoya than just about any large city in Western Europe or North America. There are plenty of business hotels with singles for 6,000 yen/night.

Restaurants are also reasonable. You can easily have a nice meal for two for 3,000 yen, including tax. Since there is no tipping, it makes eating out feel even cheaper. And if you just want a quick, semi-decent bowl of udon noodles, you can fill up at chains like Hanamaru for 500 yen.

New Realities

One fact of life about deflationary Japan is wages have also stagnated. On top of that, the old system of lifetime employment has diminished, with hourly workers as well as part-time and contracted workers making up huge portions of the workforce. With disposable income down, most people can't afford luxury items, not to mention nights out on the town.
100 yen shop
What this means is a boom in discount goods and services. 1,000 yen haircut shops are everywhere. So are 100 yen shops, where you can get thousands of products that used to cost 3...5...10 times as much. Stationery shops are closing their doors in the wake of this brute force discounting.
Discount hair salon

Discount clothing shops like Uniqlo (which has become insanely popular in Asia) offer super cheap goods. Plenty of them have a wear it today, throw it away next month mentality, but that doesn't stop locals and visitors from filling up shopping bags.

Used is now OK

Thrift stores are also all over the place. Gone is the stigma of buying used or less-than-perfect goods. Also, trucks barrel down residential streets blasting bloody loud messages saying they'll take products that you don't need anymore. (In some cases, this service can actually be a benefit, since you have to pay extra money in Japan to dispose of larger items like bookcases, TVs, air cons, etc.) What the truck drivers do with these goods is anyone's guess, but I imagine they wind up in the thrifting supply stream somewhere.

LCCs on the rise

In terms of transportation, the last few years have seen a rise in the number of low cost carriers flying the once expensive skies. Peach, Jetstar, and smaller outfits like Vanilla Air run routes all over Japan. The oldest option, Skymark, is still plugging away, too. If you book early enough, these flights are often the cheapest way to travel long distances.

Long-distance buses also ply the highways, with companies like Willer offering English websites to make booking easy. You can save a bundle by taking an overnight bus, but you might not get much sleep, and you might arrive with a sore neck. Still, it's part of the growing basket of options for cheap travel.

Get your eat and drink on for cheap!
These dishes and drinks cost between 200-300 yen each at a Nakano izakaya.

Finally, people who head out on the town can do so cheaper than at any time in the last 30 years. Izakayas (restaurants where people order small dishes and drinks) are in strong competition with one another. Many standardize their menus, charging a flat 300 or 400 yen for anything on the menu. And more and more are ditching nonsense like table charges and other costs. (Cultural note: In many Japanese restaurants, when you  buy an alcoholic drink, they push a snack on you, which can cost 500 yen or more, per person. You can often refuse this, though. I just tell them I can't eat it (which is almost always the case), and they'll take it away and strike it from the bill.)

A Tale of Two Japans

So what does all this mean? Well, as time goes by, the country is breaking down into a two-strata society, just like you're seeing in other developed countries. There are still luxury stores (which are making a lot of money from tourists), and you can still pay 10,000 yen for a haircut, 1,200 yen for a binder, and 20,000 yen for a shinkansen from Tokyo to Fukuoka. (Even after decades of price stagnation, the tickets feel expensive, but there are plenty of people and companies with the money to take the trains frequently.) Then you can top it all off with a 5,000 yen watermelon.

Or, you can get a haircut for 1,000 yen, binder for 100 yen, and flight for 5,000 yen. You can also go into a supermarket in the late afternoon and buy a cup of fruit that's marked 20-30% off (because it's been sitting there for a few hours) for 300 yen.
This cucumber sushi roll cost me 108 yen. It also inspired this blog post.

So that's what Japan feels like these days. Sometimes you see something that's expensive, and you think to yourself it's probably been that way for a long time. But more and more, you have low-cost alternatives. And it's not just about having local knowledge, as there are 100 yen shops and cheap izakayas in most neighborhoods.

Huge waves of visitors to Japan are seeing the new realities first-hand. In July, 2015 alone, Japan saw a record number of tourists - nearly two million. The current weak yen (120 yen / 1 USD) is also making the country an attractive destination. Just how many visitors prefer the higher versus lower end of Japanese living is a good question.

Well, I hope this snapshot of modern Japan provided some food for thought. Leave a comment here or on our Facebook page and let me know what you think!


eleggua said...

Very interesting and informative, andy. Thanks for the detailed analysis.

andy b said...

Thanks for reading, eleggua. I appreciate the kind comments!

CMR said...

Short and sweet, an excellent read. Thank you.

andy b said...

Thanks! Glad you enjoyed it!

Leili Harmon said...

Thanks for this write up Andy! Interesting to see how things have changed over time... also makes a move a bit more feasible sounding!

andy b said...

Thanks for reading and commenting Leili! A visit can still be costly with plane tickets and what not, but local expenses aren't too bad if one takes advantage of the deals available.

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