Deflation watch: Retort curry
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.