Archive for August, 2010

Do you know Yucho?

Monday, August 30th, 2010

 

If it looks like a bank and smells like a bank, it must be a bank

If it looks like a bank and smells like a bank, it must be a bank

Yubin chokin, the savings function of Japan’s post office, has perpetually been a thorn in the side of the Japanese banking industry, much the same way that postal insurance plans have been the thorn in the side of foreign insurance companies that have tried to make inroads in Japan’s lucrative life insurance market. The privatization of Japan Post that former Prime Minister Junichiro Koizumi staked his career on has been slowed lately with the ascendancy of the Democratic Party of Japan, which is trying to roll back some of Koizumi’s reforms.

Actually, a lot of people already have Yucho Ginko passbook accounts but may not use them much since most companies demand that employees open accounts in designated banks in order to receive salaries. In fact, a new Japan Post advertising campaign reminds viewers that their yucho accounts still beat bank accounts in a number of ways. The CM in question emphasizes that yucho accounts are pretty much the norm in the countryside, since banks still have not penetrated that far. But the ad then shows that city folk, personified by a new shakaijin (full-time employee) who just moved from his rural home town, should keep using their Yucho passbook accounts because they’re more convenient and economical than bank accounts.

There are about 24,000 post offices throughout Japan and almost every one has an ATM, so your money is available anywhere you roam. More significantly, these ATMs don’t charge fees for withdrawals or transfers between Yucho ATMs, even at night and on weekends. Almost all banks charge ¥105 per withdrawal between 6 p.m. and 8 a.m. weekdays and all day on weekends for regular passbook accounts. (If you use your Yucho ATM card to access your cash through a bank ATM then you will be charged the fee.)

Availability, however, is limited in terms of time. The smaller the post office, the less likely its ATM is working outside of normal business hours. But medium-sized post offices have ATMs that are open from 7 in the morning until 11 at night. And a few in the larger cities are even open 24 hours a day. Except for the most remote post offices, most are available 9 a.m. to 5:30 p.m. on Saturdays and Sundays.

Another reason yucho accounts were a pain to the banking industry is that their savings plans offered higher interest. Despite the partial privatization, they still do. Granted, the difference is minuscule, but given the compulsive belt-tightening that characterizes the current recession and which adds to the deflation spiral, it’s obvious that people are looking for bargains wherever they can, regardless of how small they are. Though still tied to the government, Japan Post is desperate for funds, so it’s finally taking promotional advantage of its small but significant perks to get people to use its bank more.

Last resorts: Vacation condos dirt cheap

Tuesday, August 24th, 2010

Yuzawa: A nice place to live but I wouldn't want to visit there

Yuzawa: A nice place to live but I wouldn't want to visit there

In 1987, the Law for the Development of Comprehensive Resort Areas was passed by the Diet. It was the height of the so-called bubble economy, when land and stock prices were skyrocketing with no end in sight. The idea was to make the development of leisure facilities a national project. Developers and local governments were given financial incentives, and property laws were relaxed so that more holiday-oriented projects could be carried out. One of the outcomes of the law was the invention of the “resort mansion,” condominium complexes that were built in areas where city folk could spend their vacations.

Many of these complexes were built near ski resorts because the late 1980s also saw a huge increase in winter sports activities. According to a recent report on TBS News, 18.6 million Japanese people took up skiing as a hobby in the late ’80s. Today, the ski demographic has dwindled to an estimated 7 million enthusiasts, and there are a lot of condominiums vacant as a result.

To illustrate the situation, TBS visited the town of Yuzawa, which is next to the Naeba ski resort in Niigata prefecture, about 1 hour and 15 minutes from Tokyo by Shinkansen. (Naeba also happens to be the host of the annual Fuji Rock Festival in the summer.) Under the Resort Law, 58 condo buildings were constructed comprising 15,000 units. TBS doesn’t say how many of these units are unoccupied year-round, but the prices have dropped so far in recent years that, as one resident said, “You can get one for less money than you’d pay for a car.”

The bulk of these residences are very small – less than 30 square meters – which means they probably hold little interest to anyone who doesn’t ski. Still, the drop in value is quite dramatic. One 28-sq.-meter unit that was built in 1989 and originally sold for ¥14 million was recently auctioned for a mere ¥40,000. In fact, that particular apartment was bought by the tenants association of the building that contained it. The association was worried that, at that price, anybody could buy it, and thus there was the possibility that the person who bought it would not be able to keep up with the monthly management fees (kanrihi) and pay the annual property taxes. The association plans to try and sell it at a higher price.

Good luck with that. The reason prices have dropped so far is that the people who own the condos no longer really use them any more. Besides being cramped, the condos are of generally poor quality, and, for whatever reason, the owners just got tired of making the trip. Most of the foreclosures have nothing to do with mortgages. Instead, the properties have been siezed because of non-payment of contract management fees and property taxes. Another 28-square-meter condo that originally sold in 1989 for ¥14 million is going for ¥310,000, but the buyer will also have to assume ¥17,000-a-month payments for management and pay ¥38,500 a year in property taxes. For a 50-sq.-meter apartment that originally sold for ¥40 million and is now worth ¥400,000, the management fee is ¥27,000 a month and the property tax ¥97,000. In some cases, people who buy used resort condos are required to cover the management fees that the previous owners didn’t pay before they can move in, thus making them that much more difficult to sell.

According to the town government, 40 percent of the resort owners (condos and besso, or second homes) in Yuzawa haven’t paid property taxes for some years, and 80 percent of these scofflaws have their prime residence in Tokyo. The problem has become so serious that Yuzawa has set up a special section in its Tokyo representative office to track down these owners and make them cough up what they owe. Good luck with that, too.

McDonald’s sticks its Big Mac where it’s not wanted

Friday, August 20th, 2010

Spoiler with secret sauce

Spoiler with secret sauce

With the end of the “eco car” rebate set for the end of September, the government has run out of stimulus plans and seems no closer to reversing Japan’s dangerous spiral of deflation. Consumers now expect prices to continue to drop, putting pressure on retailers to cut them even more. The latest company to join the cost-cutting frenzy is McDonald’s, which hardly needs to attract more customers. The ubiquitous U.S.-based hamburger chain and bete noire of the global slow food movement has remained above the competitive fray with profits that almost defy reason and only serve to reinforce the company’s unique brand position.

Nevertheless, McDonald’s Japan announced on Aug. 12 that it was cutting the price of a Big Mac to ¥200 from Aug. 17 to Aug. 26. Normally, a Big Mac costs between ¥290 and ¥320, depending on the location. During a press conference on Aug. 4, the president of McDonald’s Japan talked about the gyudon (beef bowl) war that took place earlier this year among the main three gyudon chains. Though he said that his company initially didn’t feel that the war had anything to do with McDonald’s, eventually they came around to the realization that lunch prices had been irrevocably reduced as a result. Zensho, the company that operates the biggest gyudon chain, Sukiya, saw its sales increase by 30 percent; and even after the war was over and prices rose (though not back to the original level) business was better than it was last year. The same went for the second-biggest gyudon chain, Matsuya, though revenues weren’t as big as Sukiya’s. No. 3, Yoshinoya, didn’t see any appreciable change after the war, probably because its prices, even after the discount, remained higher than those of the other two chains.

Consequently, McDonald’s, which can certainly afford it, has decided it needs to compete more aggressively for the lunchtime crowd and thinks that the Big Mac is the best weapon in its arsenal. And whatever the company loses in profits for the Big Mac it gains by not having to advertise the discount. McDonald’s has received enormous free coverage of the deal on TV news and in tabloids. That’s the main advantage of being one of the biggest companies in the world: Whatever you do, the media reports it. Though the discount period is only 10 days, it’s likely that the price will not return to its former level. McDonald’s has already done quite well with the breakfast crowd by reducing its McGriddle product from ¥200 to ¥100 on an indefinite basis.

Redefining the minimum wage in an age of no expectations

Wednesday, August 18th, 2010

Labor ministry poster explains life to Tokyo wage slaves

Labor ministry poster explains life to Tokyo wage slaves

One of the pledges in the Democratic Party of Japan’s 2009 manifesto was boosting the national minimum wage to ¥800-an-hour as soon as possible. As with many of the DPJ’s pledges, this one has also had a harsh reality check. Prefectural governments set their own minimum wages, which means if the central government wants to boost it for everyone it has to deal with national labor groups and associations of small and medium-sized businesses. The Minimum Wage Council did manage to increase the national minimum wage so far this year by an average of ¥15, the highest  increase ever, but the national average is still only ¥713 (from Okinawa’s ¥629 to Tokyo’s ¥791), far below the ¥800 target.

In order to understand the change, one first has to realize that the meaning of the minimum wage in today’s world has also changed. Originally, it was formulated as the first wage for new school graduates who would still live with their parents. It was the foundation for a wage structure that assumed salaries would increase with age, so that by the time a worker was in his 30s (this structure was built for men) he was earning enough money to raise a family and buy a home.

However, the 1990s economic downturn changed all that. By the end of the decade one out of every three workers was a non-regular employee whose wages remained stagnant regardless of how long they worked in the same job. As it stands now one out of every five heads-of-household in Japan earns less than ¥2 million a year. A person who works full-time, meaning 40 hours a week, for the minimum wage of ¥713 an hour earns about ¥1.5 million a year before taxes. There are currently 12 prefectures where minimum wage workers earn below what a person receiving welfare gets from the government. That, in fact, is the definition of “working poor.”

The DPJ could not reach its ¥800-an-hour target because of opposition from small and medium-sized businesses who say that any increase in the minimum wage would push them to bankruptcy. That is basically why the gap between rich and poor is increasing; not just in Japan, but in the U.S., where this gap is the widest in the industrialized world. The principle in Japan and the U.S. is that businesses must be supported for the sake of the economy as a whole, whereas in most of Europe the principle is that workers must be supported for the sake of society as a whole. In Europe, companies are expected to guarantee their workers a wage that ensures a certain standard of living. If the companies can’t do that, then they shouldn’t be in business. Of course, Europe also has high taxes and more thorough social services.

The thing is, even ¥800-an-hour is not enough to raise a family on. (The long-term DPJ plan is ¥1,000 by 2020.) A recent article in the Asahi Shimbun reported on a young man who has worked in a convenience store in Miyazaki for 13 years. He now earns ¥630 an hour, or ¥1 above Miyazaki Prefecture’s minimum wage. He works six days a week and earns ¥130,000 a month before taxes and medical insurance are subtracted. He should also be paying ¥15,000 a month for the national pension — which is uniform for non-regular employees nationwide, regardless of what they earn — but he doesn’t because he can’t afford to. Fortunately, he still lives with his parents, but he has a girlfriend whom he wants to marry. Her parents disapprove of the match, and who can blame them?

Annals of cheap: High yen supermarket discounts

Monday, August 16th, 2010

Making your yen go further

Making your yen go further

Deflation is a drag on the economy since it keeps wages low and depresses demand, but most consumers like it for reasons that aren’t difficult to comprehend. The recent spike in the value of the yen should also translate as savings at the cash register, certainly in terms of imported goods, but the lag time is difficult to gauge and, in any case, it seems a lot of importers and wholesalers just refuse to pass the savings on to the public. As reported in this space earlier, imported cheese should be cheaper, but it hasn’t really changed at all for years, supposedly because it’s considered something of a “luxury,” which means . . . what? Cheese importers have some sort of right to gouge Japanese cheese lovers?

In any case, starting Aug. 16, several nationwide supermarket chains are marking down select items on their shelves because of the high yen. Ito-Yokado, with 161 stores throughout Japan, is discounting at least 20 items a day from 10 percent to 50 percent. Many of the items are packaged goods (Crystal Geyser water, ¥78 for 500 ml) but some are agricultural products (South African grapefruit, ¥88), which is good news considering how expensive fresh produce has been this summer. The Jusco chain (300 stores), which belongs to Aeon, will offer more than 50 items at discount, including salmon from Chile (¥178 for 100 grams) and American broccoli (100 grams for ¥88), with different items being added or taken from the list on a day-to-day basis. Ito-Yokado’s program ends Aug. 22, and Jusco says that its discount plan will continue “until at least Aug. 22.” As for other big chains, Daiei says it it considering doing the same, and Seiyu has no plan to get on the bandwagon.

Summertime, and the dying is expensive

Wednesday, August 11th, 2010

funeral

Yoshida-san, we hardly knew ye

This is o-bon week in Japan, when the dead come back to visit the living briefly, so it’s as good a time as any to talk about the high cost of dying here. In 2009, 1.069 million humans were born in Japan as opposed to 1.44 million who died. Whatever that says about population shifts, morticians are obviously set to make a better living than obstetricians and midwives. In fact, the funeral business is doing horrendously well in Japan. The average funeral in Japan costs ¥2.31 million, about five times the average cost in the No. 2 funeral country, the United States (about ¥444,000). From there things just get reasonable: Korea, ¥373,000; Germany, ¥198,000; UK, ¥123,000.

The above figures are from theologian Hiroshi Shimada’s book “Soshiki wa Iranai” (Funerals Are Unnecessary). Obviously, Shimada doesn’t think much of the funeral business, mainly because it’s very much a business, even the so-called spiritual side. As the world now knows from the Oscar-winning movie “Okuribito,” the Japanese take very special care of dead bodies, but all that beauty of purpose and elaborate ritual comes with a price, and funeral homes try to make it easy for bereaved families by pulling all the various ceremonial necessities into a package that takes into consideration cremation, flowers; and because people are busy nowadays, the various time memorials, like the wake, the 7th-day observation, the 35th-day observation, etc., are all combined into a one-day funeral ceremony. The average price of the package is ¥1.5 million, with an extra ¥386,000 for feeding guests. This latter cost can be offset by the cash donations mourners traditionally bring to funerals, and Shimada again figures the average amount they will fork out is ¥750,000.

But all those sums still don’t add up to ¥2.31 million. The remainder is the payment that the family of the deceased pays to the temple where the remains will be interred. The priest who prays over the soul of the dead receives anywhere from ¥50,000 to ¥150,000, and that’s just for the prayer. Shimada points out what a racket this is by revealing that no one really knows how much one pays a Buddhist priest for a prayer, and so some people don’t take any chances and just give him way too much. Of course, he doesn’t refuse.

But the temple’s biggest charge is for bestowing a kaimyo, the special name that is given to an individual who becomes a Buddhist priest. Only in Japan, however, is this practice extended to the dead, who can basically become priests in the afterlife. And, as mentioned in an earlier post, the more money you pay, the better the posthumous name. Shimada says that Japanese temples basically make the bulk of their living not only from funeral rituals, but from this naming practice. Temples do not have regular services the way churches in the West do, and so do not have opportunities to collect contributions. They cater to the dead; or, more exactly, the survivors.

According to Shimada, this practice is maintained by a widespread belief that the law actually requires funerals, which, of course, isn’t true at all. “Processing” the dead is relatively inexpensive without the attendant ritual. The family must wait 24 hours after their loved one has been declared dead by the proper authority, and then they can just ship the body to a crematorium and collect the ashes. In fact, before World War II, most people did this and had ceremonies at home that did not involve morticians or priests. Again, you can blame urbanization. Most families don’t have the room in their condos to hold a funeral, nor the land to house a grave. The funeral business is also special in that customers tend to accept being gouged because of the somber circumstances: They’re vulnerable. Shimada says this aspect is changing somewhat. Families now actually ask funeral providers for cost breakdowns, whereas in the past they just received an unspecified bill and paid it.

Shimada is encouraged that Japanese are becoming more versatile with regard to funerals; scattering ashes and that sort of thing (though the legality of ash-throwing is tricky in Japan). Then, again, you can always opt for a Shinto ceremony, which is pretty elemental, and on average will set you back only ¥750,000.

The strategy behind non-alcoholic beer

Saturday, August 7th, 2010

To beer or not to beer

To beer or not to beer

If you’re a true beer lover, you probably think that the very idea of non-alcoholic beer is ludicrous at best, blasphemous at worst. However, in Japan right now the major brewers are actually propping up their businesses with non-alcoholic beers, which means that the relatively low price you pay for your suds is being subsidized by consumers who, for whatever reasons, prefer their grog without the high.

There are two main aspects of beer that contains no alcohol. The first, more obvious one is that people who drink it don’t get drunk, so after pounding a few they can drive (supposedly the reason it was developed), operate heavy machinery, have babies and meet the in-laws without making fools of themselves. The other, less obvious aspect is that if a beverage ‘s alcohol content is less than one percent, no alcohol tax is imposed. The three types of malt liquor — beer, happoshu, and so-called daisan (type 3) — all have taxes attached, with the amount depending on the malt content. Daisan has the least malt content and thus the lowest tax. The average price of a 350 ml can of daisan beverage is between ¥130 and ¥150. About ¥28 of that price is tax.

Right now, alcohol-free beer is selling for about the same price as daisan beer, but since there is no tax, the manufacturer makes theoretically ¥28 per can more than they do for daisan. What needs to be remembered is that production costs for all these beverages, whether they have alcohol or not, is about the same.

Continue reading about non-alcoholic beer in Japan →

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