Archive for January, 2013

Deflation watch: Retort curry

Thursday, January 24th, 2013

Just add rice.

The newly elected Liberal Democratic Party government and the Bank of Japan have set an inflation target of 2 percent as a means of reviving the economy. It’s a plan that has been met with as much skepticism as approval, but what sort of impact will it have on the average person? According to an analysis in the Asahi Shimbun, inflation has only exceeded 2 percent several times in the last 25 years. In 1989, when the consumption tax went into effect, and 1997, when the tax was raised, consumer prices spiked for obvious reasons. In the early 90s, after the bubble burst, it went up due to an increase in the global price of oil, but during that period wages also went up by 4.8 percent, so the increase wasn’t that noticeable. In the summer of 2008, just before the subprime crisis, consumer prices went up by 2.4 percent, also due to a rise in energy costs, but wages actually decreased by 0.3 percent. It’s this dynamic between consumer prices and wages that determines how the public “feels” inflation. According to Japan’s Tax Bureau, the average income of salaried workers in 1997 was ¥4.67 million, and in 2011 it was ¥4.09 million. In terms of total money, Japanese salaried employees earn ¥25 trillion less than they did at the peak of the bubble era. Some of this loss in buying power has been offset by the attendant decrease in retail prices. Anyone who lived in Japan during the bubble will tell you that consumer prices were very high, especially when compared to those in other countries, so the subsequent drop doesn’t seem unnatural.

All of which is to say that we plan to post occasional observations about price changes over time as a means of putting Abenomics — whose core strategy is to boost inflation — in perspective. First up: retort curry, meaning prepared curry topping in a pouch that is heated in a pan of boiling water. Except for noodles, it’s the most common instant meal in Japan and there are dozens of retort curry product lines. The volume of a single serving package is usually 200-210 grams, with higher end products topping out at ¥300 retail per piece. However, above the ¥100 price line, there really isn’t that much difference from one brand to another except maybe in terms of meat volume.

Below ¥100 is where the competition lies, and in that price range the most representative brand is House’s Kariya. Though the recommended retail price is ¥120, after the turn of the millennium Kariya usually retailed for about ¥98 in line with the “one coin” marketing strategy that said people tended to resist a product once its price floated above ¥100. Following deflationary patterns over the course of the decade, Kariya’s price actually dropped, first to ¥88 and then to ¥78, in discount and drug stores that specialized in bulk sales. The spread of such stores put pressure on regular supermarket chains to also reduce the price of Kariya, since it was so popular. Last weekend, we found it on sale at our local discount drug store for ¥68. That’s even cheaper than generic brands, which usually go for ¥296 for a set of four pouches. More significantly, the price of other brands of retort curry has also come down, and while none are as low as ¥68, more have drifted below the ¥100 line. This means a curry meal can actually cost less than two convenience store onigiri (¥200), the standard model for a cheap lunch, since a microwave package of prepared white rice is ¥80-¥90. Of course, non-instant curry, made from packaged roux, costs less per serving, but retort curry will likely become even more in demand with the projected increase in single-person households, and so we predict it will resist any inflationary pressure.

Gas station business losing to reality

Wednesday, January 16th, 2013

Tanks for the memories

According to the Petroleum Association of Japan, the demand for gasoline continues to decrease owing to the popularity of hybrids and mini-cars, the greater fuel efficiency of automobiles in general, and a trend that sees more and more young people foregoing the pleasures of motoring. In 1999, 250 million kiloliters of gasoline were sold in Japan. In 2011 the amount was about 200 million. Consequently, the country doesn’t need as many gas stations. There were 60,000 in 1994, only 38,000 in 2011.

The disappearance of gas stations will likely accelerate this year due to a revision to the Fire Prevention Law. Several years ago it was discovered that gasoline reservoirs — the tanks buried under gas stations to store fuel — were leaking at an alarming rate, so the government enacted a law to address the problem. If the tank is 40 years old or older, the owner of the gas station must replace it or repair it. If he doesn’t, his license to pump gas could be revoked. Either operation requires excavation and the use of heavy machinery, and costs between ¥1.5 and ¥2.5 million. Many gas stations, in fact, have at least three tanks underground: one for gasoline, one for diesel, and one for kerosene. Each would have to be replaced once it turns 40. The revision went into effect in February 2011, and all gas stations with tanks older than 40 years had two years to comply. At the same time, the government introduced a subsidy that would provide two-thirds of the cost of the replacement-repair if the application is made by the end of January 2013. According to an industry group survey cited in Tokyo Shimbun, as of the end of September only 30 percent of tanks that needed to be changed actually had been. Of the other respondents, 7.5 percent said they are considering closing their businesses due to the revision. Others said they will wait until the last minute to apply for the subsidy. An industry representative told the Tokyo Shimbun that the older the tank the older the gas station owner, so it is likely they will simply decide to retire if no one in the family wants to take over the business. Perhaps in light of these findings, the government has already decided to extend the subsidy period.

It may not make much of a difference. The projection for gasoline demand in 2020 is only 130 million kiloliters. The main problem with lack of demand is that it affects different regions differently. The loss of gas stations in major cities and densely populated suburban regions won’t cause major problems, but in outlying rural areas, where there is little public transportation and people rely on automobiles to get around, it could cause an increase in so-called gas refugees.

Among Japan’s prefectures, Yamaguchi pays the most for gasoline a year per household — ¥80,000 — while Osaka pays the least, about ¥14,000. If a gas station in Osaka closes, not many people will notice, but if one in Yamaguchi shuts down, the people who relied on it will have to drive even farther to fill up, thus consuming more gasoline just to buy gasoline.

As a side note, the development of electric cars doesn’t seem to be much of a factor in these projections. The magainze Toyo Keizai reports that despite government subsidies, the Nissan Leaf, which first went on sale in Nov. 2010, isn’t selling as well as expected (and Toyota, which just regained its position as No. 1 carmaker in the world, has cancelled its plans to make an electric).

As of last November, Nissan had sold 43,000 Leafs worldwide, including 19,000 in Japan and 17,000 in the U.S. Since manufacturing capacity is 50,000 cars a year, the model is only fulfilling 43 percent of its potential. Experts say the problem is still driving distance. Even with new improvements in battery storage and efficiency, a full charge for a Leaf will only get you 250 km, while the average compact with a full tank could get you up to 800 km.

The relative savings in gasoline costs enjoyed by the electric car driver doesn’t seem to be a major consideration for consumers at the moment. However, this may change as more gas stations disappear, since electric chargers can be installed anywhere without any expensive requirements: dealerships, service areas, even convenience stores.

Energy conservation isn’t just for summers any more

Wednesday, January 9th, 2013

Last summer when the antinuclear movement was receiving a lot of media coverage, the government and utilities justified their plans for reopening nuclear power plants with statistics purportedly showing how dangerously close to capacity electricity usage is in the summer, when everyone has their air conditioners on. Thanks to energy conservation efforts on everyone’s part there were no overloads, but in terms of households, reibo (cooling) only accounts for 2 percent of overall energy usage when measured in calories. Danbo (heating), on the other hand, accounts for 25 percent of home-energy usage.

Fill ‘er up: Kerosene station in Chiba

Of course, there are various methods for heating homes in Japan. In addition to electricity, there is natural gas, liquid propane gas and kerosene (toyu), but electricity has been increasing in recent decades as a means for home-heating. Between 1980 and 2005, the use of kerosene, which is utilized in space-heating “stoves,” declined from 71 to 45 percent in terms of heating needs in the Kanto area, while both natural gas and LPG increased from 21 to 35 percent and electricity from 8 to 20 percent. However, when you factor in all of a home’s energy needs — cooking, lighting, bathing, etc. — electricity accounts for 50 percent, kerosene 17 percent, natural gas 20 percent and LPG 10 percent of household energy consumption. That was for all homes in Japan in 2009. In 1973, electricity only accounted for 28 percent of overall household energy usage. So with the promotion of all-electric houses in recent years, the overall portion of home heating by electricity has probably gone up even more.

The peak period for electricity usage in the wintertime is between 5 and 6 p.m., and during the current sharp cold spell, electricity usage as reported by Tokyo Electric Power has been over 90 percent during the peak time slot. The main difference between wintertime and summertime is that power plants reduce capacity in the winter, so 90 percent represents less power usage in the winter than it does in the summer. Most air conditioners run on electricity, but as shown above heating systems use a variety of methods, so electrical usage is deemed to be less. But since electricity usage in the winter is on the increase, why aren’t power companies warning people to cut back when the usage gets close to the limit, as they did last summer?

Continue reading about wintertime energy conservation →

Cleaning ‘angels’ reinforce positive image of Japanese workers

Friday, January 4th, 2013

Cleaning crew (in pink) waiting with the hordes at Tokyo Station for the train to arrive (photos: Jason Jenkins)

If, like thousands of others, you took the shinkansen (super express) during the recent New Year’s holiday break, when you arrived at a line terminal you likely saw uniformed cleaning crews waiting at attention for the train to stop. They would have bowed as you left the car and then scurried on board to clean it up before the passengers waiting on the platform were allowed to board. During this time of year, in particular, express trains are packed 24/7, and keeping arrivals and departures on time is the number one priority. These cleaners, on average, have only seven minutes to make the cars spic-and-span, and their methodical efficiency in getting that job done has made them heroes in the media, the newest symbols of Japan’s storied work ethic.

At least one book has been written about these train cleaners, CNN produced a special report on them and dozens of magazine articles have covered them in detail. A recent issue of Shukan Post concentrated on one of the companies, Techno Heart Tessei, which is a subsidiary of JR East. Right at the beginning of the article, the Post offers the opinion that these workers provide a positive example for any business in Japan. It then goes on to describe in detail the “shinkansen gekijo,” (bullet train theater): how the cleaners, both men and women, accomplish their “miraculous” task, which is methodical and reducible to the second. There is one cleaner per non-reserved car, two or three per reserved car.

Overhead racks are checked on the initial round while seats are reset to their original orientation and underfoot trash is quickly swept to the middle aisle. On the return round, window ledges, blinds and panes as well as folding tables are wiped; headrest covers are replaced if dirty. Then someone comes through with a broom to collect the trash. Separate staff handles toilets. All operations are checked by the supervising cleaner and cleared. Usually, these teams complete their jobs with more than a minute to spare. On the average, they clean 20 trains a shift.

Continue reading about train-cleaning "angels" →

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