(pensive music) (coins clanging)
- [Peter] Whether you're buying a ticket
for the subway.
(speaking in foreign language)
- Stopping by McDonald's for lunch.
Or shopping for a computer,
the prices of these things don't change much in Japan
but in the US, they're going up,
and inflation hit a three-decade high in October.
Whereas in Japan, inflation is about zero,
and has been that way for nearly 30 years.
In fact, there have been periods
when prices were actually falling, deflation.
So we went shopping around Tokyo
to see how low prices that may seem great
for our wallets could actually be one sign
of a less dynamic and slow-growing economy.
(pensive music)
If you wanna buy electronics in Tokyo,
this is the place to be,
and coming to Akihabara
is also a good place to compare prices
with the US, and see how Japan is dealing
with inflationary pressure differently.
In the US, the price of computers jumped 8%
in the month of October compared to a year earlier,
whereas in Japan, prices of these Notebook computers
actually fell a little more than 1%.
And one of the reasons for that big difference is demand.
As the US has begin to recover, at least economically,
from the pandemic,
there's been an upsurge of demand,
the US has seen a lot of supply chain pressures,
including shortages of parts and materials,
like semiconductors that go into so many products,
including electronics.
And also, container ships have been blocked at ports,
such as Los Angeles and Long Beach.
So they're backed up, and that means a shortage,
and in some cases, it means retailers feel
that they can or must raise prices.
Japan faces many of the same supply chain problems
as the US does but in general,
it has not resulted in price increases in Japan.
One reason is that consumer demand in general
is not strong in Japan, and hasn't been.
And that's part of the inflation story
that Japan has never really experienced
what we see in the US right now.
But companies in the US found it hard
to meet that higher consumer demand
because they aren't able to find enough workers.
So that's driving them to boost salaries
to recruit workers
and the cost then is passed on as higher prices.
And you can see that happening on a menu at McDonald's.
(speaking in foreign language)
- Here in Tokyo, a Big Mac
was the equivalent of about $3.40.
In the US, they're actually raising prices at McDonald's,
and according to the company,
that's largely because of wage increases.
McDonald's said wages have gone up
at least 10% so far this year at US restaurants.
And a survey finds that companies
in the US are setting aside an average 3.9%
of total payroll for wage increases next year,
the most since 2008.
In Japan, we just haven't see that wage price cycle develop.
One reason that wages tend to rise more slowly
in Japan is because of a more rigid labor force.
People are staying at companies for a very long time
and they really don't have the flexibility
to switch jobs without great personal loss.
So companies are not really under pressure
to offer these people wage increases.
Because wages don't go up here,
people aren't willing to open up their wallets.
One survey by the Bank of Japan found
that about half of people think of price first
when making a purchase,
and they tend to reject any retailer
that raises prices.
Companies have found they're better off
keeping their prices level.
(coins clanging)
So for example, train ticket prices in Japan
haven't gone up that much for the last 30 years.
Whereas in the US, the minimum fare
on the New York Subway has more than doubled
over the same period.
(coins clanging)
Besides train tickets,
you see flat prices really all across the economy.
For example, Eon, which is one Japan's biggest retailers
putting signs in its stores saying prices frozen!
At least until the end of the year.
Prices that don't change very much
can be reflective of a society
that doesn't change very much.
And that could be a good thing or a bad thing,
depending on your perspective.
Japan is still a pretty vibrant place.
It's a stable society,
it has kept its unemployment rate low
but it tends to be accompanied
by other phenomena that are not so favorable,
such as static wages, such as an economy
that seems to lack some of the dynamism
of the US where you have a new company like Tesla
storming onto the scene
and seizing a big part of a market like cars.
You can see some of that recently
in growth figures.
Japan's GDP shrank at an annual pace of 3.6%
in the third quarter,
whereas in the US, the figure was 2.1% growth.
Low prices and prices that never go up
may sound like a good thing
but they can also reflect
larger economic problems in a country.
(pensive music)