Archive for the ‘Economy’ Category

Pity the driver: Cabbie salaries much lower than average

Friday, August 2nd, 2013

Hurry up and wait

Hurry up and wait

Though customers aren’t expected to tip here, Japanese taxis are among the most expensive in the world, and next year rides will probably cost even more since the transportation ministry is considering removing the cap on fares and allowing a 2.86 percent rise to help taxi companies adjust to the consumption tax increase. That would boost the base taxi fare to ¥730 in Tokyo.

Before you start complaining think about the drivers. In 1995 the average salary of a Japanese cabbie was ¥4.03 million. In 2005 it was ¥3 million. And since the recession started in 2008 salaries have hovered between ¥2 and ¥3 million. There are various reasons for this loss of income, the main one being deregulation.

In 2002, the administration of privatizing Prime Minister Junichiro Koizumi allowed taxi companies to increase their vehicle pools. Between 2001 and 2007, the number of taxis nationwide increased by 15,000, driving up competition and driving down the amount of revenue per cab. In 2009, the government re-regulated the industry in an attempt to cut the number of cabs in 156 cities where it was deemed there were too many. Since then salaries haven’t gone down but they haven’t gone up either. Now taxi drivers and taxi companies are afraid because one of the pillars of “Abenomics” is, again, deregulation.

Though cabbie salaries compare to those of entry level jobs, most of the drivers are not entry-level workers. The average age is 56.8, and many have families to support. Moreover, the average number of years worked is 9.3, which implies that many cabbies started driving later in life, after they worked somewhere else and lost their jobs. There are very few taxi drivers in their 30s, even less in their 20s. Some older cabbies drive to supplement their social security.

In the July 4 issue of the Asahi Shimbun there was a profile of one male cabbie, 44, who has been driving since 2009, when he was laid off by a small company. The taxi company he works for has a sales quota. Each driver has to bring in ¥480,000 in fares a month. If the driver makes more than that, he gets to keep 53 percent as his commission. If he makes less, he only keeps 40 percent. The driver says he needs ¥250,000 a month to survive so he figures he needs to bring in ¥40,000 per shift, and it’s difficult. Apparently, some drivers supplement their revenues with their own money if they don’t earn their quota because they think it’s worth it in the long run.

Another taxi driver interviewed by the Asahi is 60 and has been a driver in Tokyo all his life. He supports a wife and grown son on ¥4 million a year and used to make ¥6 million. His normal work day is from 8 in the morning until 4 the next morning. The competition in Tokyo is so fierce that it’s sometimes impossible to find a place to wait for fares since so many other cabs are waiting. He tells the newspaper that some companies reduce their fares to be more competitive, which is illegal. Another common employer practice that may not be illegal but certainly seems unfair is subtracting the 4.8 percent handling fee from a cabby’s salary whenever a customer uses a credit card.

According to the Japan Federation of Hire-Taxi Associations, as of March 2010 there were 371,000 taxi drivers in Japan working for companies and 46,000 private taxi drivers. Of the former, 7,700 were women. The average number of hours for a cabbie is 193 a month. The average for all jobs is 183 a month. Revenues in 2010 nationwide amounted to ¥1.78 trillion. According to the labor ministry the average annual salary for a driver in 2011 was ¥2.9 million. The average for all industries is ¥5.26 million.

Golf courses adjust to harsher economics and changing demographics

Monday, July 22nd, 2013

A fairway of your own

A fairway of your own

Of all the cultural phenomena that marked the bubble era of 1980s Japan, none was more economically significant than the rise of golf. Despite its relatively small land area, Japan boasts the third largest number of golf courses in the world — 2,442 as of 2008, which accounts for 7 percent of the earth’s total (the U.S., number one, has 50 percent, with the U.K. a distant second with 8 percent).

The majority of these courses were built before 1990, when land prices were at their highest. However, what really demonstrated the profligacy of the time wasn’t so much the insane number of courses in a country where 70 percent of the land is mountainous, but the practice of investing in golf memberships. The “bubble,” of course, refers to the artificially high valuation of real estate and securities during this time, a situation that extended to almost anything that attracted investment, including golf memberships, which could be brokered as if they were stocks or bonds. Many people who had no interest at all in golf as a pastime bought golf club memberships simply as an investment.

As with all investments made during a bubble period, people who bought them got burned. According to the Kanto Golf Membership Trading Industry Association, the average price of a golf club membership in the seven prefectures that make up the greater metropolitan area in and around Tokyo rose from ¥5 million in 1980 to almost ¥50 million in 1990 and then dropped to ¥2.5 million in 2003. The price spiked briefly in 2006 at ¥5 million before plummeting to ¥1.45 in early 2012. However, it has risen slightly since then and is now around ¥1.8 million.

Continue reading about the dropping prices golf memberships →

Deflation watch: Kabocha

Monday, July 1st, 2013

Japanese pumpkin, raw and prepared

Japanese pumpkin, raw and prepared

The main story at the heart of Abenomics as far as the Japanese media is concerned is that Japanese exporters are making more money since the Liberal Democratic Party regained power. Secondarily, energy costs are rising thanks to a related increase in the dollar against the yen, not to mention imported wheat prices, which affect all sorts of processed foods in Japan. Many food-related manufacturers started raising prices on July 1 as a result.

So far, the price of imported fresh produce hasn’t been affected that much. Last year we reported on the very low price of bananas due to specific circumstances, and since then the price has gone up quite a bit owing to a typhoon that destroyed much of the Philippines’ crop. However, the prices of other fruits and vegetables that tend to be imported in large amounts haven’t changed significantly. If anything, some local produce may have come down in price and thus become more competitive, notably kabocha, the Japanese style of pumpkin, often called buttercup squash in English.

Kabocha is grown in Japan but is mainly available in the fall and early winter. During the rest of the year it is imported mainly Mexico and New Zealand, but also from New Caledonia and South Korea. Demand is so strong that Japanese companies have been running farms in these countries for almost 20 years to grow kabocha exclusively. New Zealand first started exporting the vegetable to Japan in 1988. Actually, China, India and Russia produce much more pumpkin and other types of squash but the kind they grow is not necessarily popular here. (Also, there seems to be some issue with China’s use of agrichemicals.) Japanese prefer a strain referred to as kuri-kabocha, which is drier.

Normally, the price of Japanese kabocha is two to three times that of the imported kind. In April at the Tokyo Central Produce Market, domestic kabocha was going for ¥356 per kg, while foreign kabocha was only about ¥97. However, lately the price of Japanese kabocha has come down to almost even with foreign kabocha, which is a remarkable drop. Last week at our local supermarket kabocha from Mexico was only a little less expensive than kabocha grown in Ibaraki Prefecture. It’s not clear if this is due to higher import prices because of the rising dollar or just that the domestic product is suddenly cheaper. It’s probably both, since Japanese farmers have to contend with Mexican kabocha almost year-round now that there are two growing seasons for kabocha in Mexico.

Also, kabocha, once a standard item in the Japanese diet, lost popularity some years ago and seems to be making a big comeback now among health-conscious families — kabocha contains more calcium than milk does — so farmers are producing as much as they can, thus bringing the price down.

Should healthy people pay less for health insurance?

Saturday, April 27th, 2013

Finance Minister Taro Aso has been shooting his mouth off again. Tokyo Shimbun reports that at a recent “meeting” he said it “wasn’t fair” that the country had to pay for the medical costs of people who “eat as much as they want and drink as much as they want and then end up with diabetes.”

Japan’s national health insurance does not discriminate between people who maintain good health and those who don’t. You pay according to your income. “Of course, if you have an inherent weakness, that’s another story,” Aso added, obviously recognizing that some people will take offense at his opinion.

Hospital bill for specified elderly patient (over 75), who only pays 10 percent out of pocket.

Hospital bill for specified elderly patient (over 75), who only pays 10 percent out of pocket.

But apparently it’s something he’s thought about a lot. The Asahi Shimbun reports that during opening remarks at a Lower House “party” of some kind Aso said, “I think we should make an incentive for people who are making an effort to stay healthy.”

The government is trying to reduce medical costs, and he believes if someone over, say, 70 continually foregoes treatment for minor complaints that person should be rewarded. “Maybe give them ¥100,000 in cash,” Aso suggested. Then, those people who think they might as well go to the hospital for something small will think twice.

This idea has been floated before, but doctors’ groups, which would suffer financially from such a change in the public mindset, have protested, saying that discouraging people from seeking medical advice for anything is tantamount to killing them.

Aso claims that the average medical cost for a person over 70 is a million yen a year. We couldn’t corroborate that statistic, but fellow Liberal Democratic Party lawmaker Taro Kono, in his email newsletter, said that the average Japanese person costs the government ¥24 million in health care during his/her lifetime — paid for through both insurance premiums and taxes — and that 49 percent of all medical outlays are spent on persons 70 and over.

Then we thought of our own situation. We’ve been paying into the national health insurance scheme for 26 years and reckon we’ve spent almost ¥10 million. We can also count on the fingers of one hand how many times we’ve actually gone to the doctor in those 26 years for something that falls under our coverage, so obviously we aren’t getting our money’s worth — so far.

Deflation watch: gyudon

Monday, April 15th, 2013

Before the fall

Before the fall

Good news for beef lovers. On April 10 gyudon (beef bowl) chain Yoshinoya announced it would cut the price of its standard namimori serving by ¥100 to ¥280 starting April 18. Sukiya, the No. 1 gyudon chain, was selling its namimori version for ¥250 until April 12, and No. 3 in the race, Matsuya, was doing the same thing until April 15.

At the press conference where Yoshinoya made the announcement, company president Shuji Abe told reporters that Yoshinoya felt it could not reach its desired sales target “with prices as they are,” and since “price is the biggest factor affecting sales,” they decided to cut it by more than a fourth. Though Yoshinoya’s two rivals are ending their own price-cut campaigns this week, they carry them out on a fairly regular basis, so it’s likely they will react in kind to the announcement.

In reporting the announcement, the Asahi Shimbun reporter remarked that, although consumers will certainly appreciate the lower price, how can Yoshinoya hope to make a profit after such a drastic cut? Moreover, what does the move say about the government’s strategy of boosting inflation? Yoshinoya’s Abe stressed that the business environment has become “even more difficult” owing to the decrease in the yen’s value, which makes importing beef more expensive. But he also said that the company will still be able to turn a profit because it plans to import even more beef and thus can expect cheaper wholesale prices now that the regulations with regard to beef imports have changed.

In 2004, imports were restricted due to the BSE scare, but those restrictions have now been lifted, and beef from older animals can be sold in Japan. In addition, Yoshinoya plans to cut its retail personnel by “making the work routine in restaurants more efficient.” So even if the prices for the main product drop by 25 percent, according to company projections based on past experience the number of customers should increase by 30 percent, and if that happens sales will increase 15 to 20 percent.

A food industry analyst pointed out something else to the Asahi: Fast food in general has become cheaper in the past 10 years or so, and consumers have just become accustomed to the fact. There seems to be an upper limit to what they will pay, and chain businesses know this. What that means is that these businesses will fall into a permanent state of price competition, even as the cost of ingredients goes up. That means personnel costs will not rise; if anything they’ll have to be cut. And restaurants that don’t belong to chains will be squeezed out. For a while Yoshinoya tried to compete in terms of quality and selection by adding new products to their line, but obviously they’ve abandoned that strategy and returned to price competition.

This is not the kind of outcome the government wants, but consumers have become so used to lower prices they probably won’t spend more except for basic necessities, and the retailers who can keep their prices down will make profits through volume. Much has been made in the media of how department stores are suddenly enjoying better sales, but their customers tend to be people with larger amounts of discretionary income through investments in stocks and foreign currencies, both of which are going up. Such people spend their windfalls on expensive watches. They are not representative of the general public, much of which still decide their spending regimens based on wages and salaries, and despite the government’s hopes and efforts those aren’t likely to rise any time soon.

Japan has become a nation of coupon clippers and bargain hunters. It’s a hard habit to break.

Employment counselors forced to sit on the other side of the window

Wednesday, April 10th, 2013

The rise of non-regular employment has received a lot of coverage because of its effect on job security in the general work force. A seldom discussed side effect is the acute anxiety experienced by non-regulars as their contracts approach their expiration dates. Will mine be picked up for another year? Will I have to go out and look for a new job next month?

Hello Work website

Hello Work website

For public non-regular employees this emotional roller coaster starts right after Jan. 1, since most contracts end with the fiscal year in March. And for those who have been working in the same position for an extended length of time, there is no solace in the new law that goes into effect this year and which says an employer must hire a contract worker as a regular full-time employee, complete with benefits, if the worker has been in the same position for five years.

Though it’s assumed that many employers will work the loophole by not renewing a contract just before the five-year period is reached and then hiring the person back after a six month “cooling off” period with an open-ended contract, non-regulars who work in the public sector aren’t covered by the new law in the first place. They can be retained as non-regulars indefinitely.

This exception was highlighted when the labor ministry announced that 2,200 non-regular members of its unemployment advisory staff had not had their contracts renewed for fiscal 2013. That represents 10 percent of all the non-regulars employed at Hello Work counseling centers nationwide, and presents an interesting scenario: Former employment counselors who themselves must seek employment advice.

In fact, a Tokyo Shimbun article described one woman in her 50s who received her notice in early March while she still had several weeks on her contract. Though she knew there was always the possibility her yearly contract would not be renewed the lateness of the notice (the media reported the announcement as being “sudden”) caught her off-guard.

In the last weeks of March she was looking for a new job at Hello Work on Saturdays while still working Monday through Friday at the same facility counseling people who themselves were looking for jobs.

One part of the new law that was already in effect before April 1 is to make the practice called yatoidome illegal. “Yatoidome” means nonrenewal of an employment contract for “no good reason,” but, of course, “good reason” constitutes a gray area that the Japanese legal system isn’t equipped to address. It is this part of the law that doesn’t apply to public workers, supposedly because non-regular government employees are only hired as stopgap workers, meaning people employed to fill certain positions on a temporary basis. They do not have to pass a test the way full-time regular civil servants do. However, in many cases, these workers become as indispensable as regular employees. In 2012, 63 percent of all Hello Work employees were non-regulars.

As for why the labor ministry decided to effectively lay off so many employment center staff at one time, a representative told the media that the ministry hired extra contract workers when the recession worsened in 2008 and again after the disaster of 2011, but now the job situation “is stabilizing” so the ministry doesn’t need as many counselors. Some laid-off employees counter this explanation by claiming that their workloads have been heavier in recent months, not lighter, especially in areas most affected by the disaster. What may have sparked the layoffs was the finance ministry, which has been auditing budgets across all government agencies and ministries and demanding cuts.

The yatoidome exception doesn’t just apply to national public workers. One-third of all local government employees, or about 700,000 people, are also non-regulars. That’s an increase of about 100,000 since 2008, according to a labor ministry survey. Of these, 60 percent work more hours than regular employees. More than half of these non-regulars make less than ¥160,000 a month or ¥2 million a year. And because they are technically part-timers, they are not up for promotions or salary increases. The most prevalent jobs in this category of public worker is day care attendant and librarian, but it also includes policemen, firemen and school teachers.

Court says railway can make patrons pay through the nose

Friday, March 29th, 2013

Inzai Makinohara Station

Inzai Makinohara Station

We live on the Hokuso Line, which connects Takasago in eastern Tokyo to the Nihon University Medical Center in northern Chiba, a distance of 32.3 kilometers. The Hokuso Line has been called the most expensive train line in Japan. From one end to the other it costs ¥780, and for us to get from our station, Inzai Makinohara, to its neighbor to the west, Chiba New Town Chuo, it costs ¥290. Many people who live on the line and use it have complained to the relevant authorities and demanded that fares be reduced. In fact, five local residents sued the central government, demanding that the court rescind the state’s approval of the Hokuso Railway’s plan to lease its tracks to another railway company and claiming that the plan did not benefit users. On Mar. 26 the Tokyo District Court rejected the suit, saying that the government authorization did not damage the welfare of the railway’s users in any way.

The plaintiffs said they didn’t understand the judge’s reasoning. One, a 19-year-old man, told an Asahi Shimbun reporter that when he was a high school student he spent ¥90,000 on a six-month pass, which, on average, is about four times what it costs for a comparable student pass on any other line. Now that he’s graduated and going to a prep school he no longer qualifies for the student discount, and has to pay ¥170,000 for half-a-year. Single-station fares on the Hokuso are about twice as much as they are on other lines. The Hokuso Line is part of the Keisei Dentetsu Group, whose average fare for 32 kilometers is about ¥470, so the Hokuso fares are 70 percent higher than fares on other lines even within the same railway group. The reason for the high fares has been explained in this blog before, but in a nutshell, the line was designed to serve the Chiba New Town development project, which began in 1969. Planners envisioned 340,000 people eventually moving into the New Town area, which encompasses portions of three cities, but in the end only about 93,000 actually did. The main problem for the Hokuso Railway Co. was the cost of construction, in particular the cost of land. Purchases were made at the height of the bubble era, when land prices were sky high and so were interest rates. The debt currently stands at ¥90 billion, and the railway pays ¥5 billion on the note every year. But the Chiba New Town authority, which the railway belongs to, also has to pay shareholders, many of whom are farmers who sold it the land in the first place. You can see their huge houses, built with the money they made and are still making, all over the region that lies alongside the Hokuso Line. Since opening for business in 1991, the railway has raised its fares nine times, though it also cut a few, but only by ¥10.

The kernel of the court case is a leasing deal that the Hokuso Line made with Keisei Dentetsu, which wanted to use the Hokuso tracks for its Skyliner and Sky Access express trains to Narita Airport. Regular users of the Hokuso Line were under the impression that (more…)

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