Critical Thinking Session

Bad inflation stragety: How to survive the hike in prices

    Japan has suffered a long-term deflation and stagnation lasted for almost 30 years after the burst of bubble economy in the 80's. I'm not an economist, so I haven't followed the CPI or anything, but, as a consumer, I have watched the market closely by eating gyudon for more than 20 years now.


    When I came back from the States in the millenium year, the price of a regular-size gyudon was about 380 yen. Soon, maybe in a year or so, it marked the rock bottom at 280 yen. I remember I lived close to Tohachi Street between the cities of Mitaka and Chofu, and there was Matsuya along the street just behind my apartment. I went there daily, because the price was extremely friendly for a university student like me, and I remember how I felt happy to see the prices of their menus go down while the portion of food stayed generous. They were also handing out some discount tickets, so I enjoyed having a free salad. Several years in after I started working, I saw the price went up, and it hit the top at 380 yen. I was not a student anymore, so I didn't really care about it. Furthermore, the frequency of eating gyudon significantly fell after I started getting paid for my work. Yes, I wanted to explore other kinds of food dishes using my financial advantage as a salary getter, not a tuition payer! Gyudon shop became a place to go in the early morning after getting heavily drunk, so I didn't even notice how much I paid!


    The price fell and, again, hit the bottom at 280 yen at one point around 2013, and it stayed somewhere around 300 yen until before the pandemic. As many of you can recall, the period overlaps with the years of Abe regime, and he and Mr. Kuroda, the top of Bank of Japan, appealed the public that the nation had to get out of the long stagnation period by raising the salaries and the prices. The target of the CPI's annual hike has been 2% since then. A lot of family restaurants and gyudon shops started to put some higher price-range items on their menu list, and a lot of them started selling beer and other alcoholic beverage besides the conventional food menus. Quite recently, I walked into Matsuya for the first time in a while, and I saw the price set at 380 yen, while Sukiya sells a regular size at 400 yen and Yoshinoya at 448 yen. It seems like the targeted inflation has been proceeding for other reasons than a pure economic growth. No, quite opposite.


    According to my understanding, this sudden inflation has been caused by three main pushes.


    The first push is apparently from the weakening yen. As the costs of imported materials and items automatically rises, it is difficult for retail sellers to secure a profit. As a consequence of this weakened buying power, this weird trend of inflation is going on.


    The second push is, needless to say, the Ukranian War. All the world has been suffering the price hikes in crude oil and food materials, and Japan is also within the party. Well, this up-trend in crude oil hasn't been short, in fact. Back in the late 90's, the lowest gasoline price per litter I saw was 78 yen, and disel fuel was lower than 50 yen at the time. Now what? When I fueled the bus in Nagano the other day, the price of disel fuel was 146 yen!


    The third push, and the most important one, being the pandemic effect. The government has abanduntly supplied money to the damaged market in the past two years, so they need to boost the tax income in the coming years, so a bit of inflation also matches their need to lower the value of Japanese yen.


    Supported by the long time wishes of Japanese government and Bank of Japan, it seems that there are parties that see this inflation as partially a good thing, while it is not for most of us, the ordinary people. However, it is not necesarrily a bad thing as well. When the price hike is reflected to our income level, this weakened yen will bring a lot of foreign tourist to Japan, and production centers of companies once escaped Japan would move back to Japan that would create a lot of employment. And most importantly, it gives the people the urge to use their saved money than keeping them unworked in their chest of drawers or their bank accounts, which would become the best effect of this seemingly critical situation.


    Instead of shrinking in fear, let the money work, let it dance!



1. What do you think would be upsides and downsides to the current inflation?


2. How would you protect your asset while the value of yen is depreciating?


3. If this inflation wouldn't stop, do you think Japanese people will start using their saved money aggressively instead of keeping them unworked?


Writer : David Yasui, Organizer of SoC