Bargain Hunters, Avoid Tokyo!

No sign of consumer revolt over high prices in world's No. 2 economy. JAPAN'S DISTRIBUTION SYSTEM

WHEN Shigemi Ishigaki went to Hong Kong last year, she was knocked over by the prices. Her favorite face lotion was a steal at 2,000 yen ($13.39) compared with a Tokyo price tag of 7,000 yen ($46.87). A silk blouse could be had at a 10th of its Tokyo price. ``I was shocked at the cheapness,'' she says.

So are veritable hordes of Japanese who head by the plane load for shopping trips in Hong Kong. Ms. Ishigaki marveled at long lines of Japanese waiting for as much as two hours to get into the Hong Kong outlet of Louis Vuitton.

Japan has become the world's No. 2 economic power (behind the US), expressed in the sharp escalation of the yen's value in the past three years. But these riches have had little impact on the standard of living of Japan's consumers.

In theory, the yen's rise should have made imported goods sold in Japan far cheaper. Instead, Japanese prices, for all consumer goods, are the highest of any industrial nation.

The strong yen, however, has made it easier for Japanese to travel abroad, as they are doing in record numbers. There they are discovering the reality of their price gap. The price system has become an issue in the economic conflict of the United States and Japan, raised by Americans as a major structural barrier to promoting exports to Japan and reducing Japan's huge trade surplus. Americans trying to open Japan's market are seeking allies among Japan's oppressed consumers.

``We think the consumer in Japan deserves some breaks,'' said newly arrived US Ambassador Michael Armacost in a recent speech.

There is little evidence yet of a consumer revolt ready to tackle the core of Japan's price system. But trips to Hong Kong are only one sign that Japanese consumers are not just sitting still anymore: They are finding more ways to profit from the yen's power.

Those who do not desire sightseeing with their shopping have started importing on their own through a mail-order system. More than 20,000 people have come to the Tokyo office of the Manufactured Imports Promotion Organization (MIPRO), a government-sponsored group that has been providing information about how to do this since 1986.

A MIPRO survey shows that a US-made electric guitar, priced at 265,000 yen here, can be obtained through this process at 152,225 yen including shipping costs, tax, and duties. A set of England's Wedgwood china, sold for more than 140,000 yen here, can be had for just 59,000 yen by mail order.

``I want Japanese consumers to become wiser,'' says Keiko Kato, a MIPRO official who has taken advantage of the deals herself. ``It's like a sin for people if they don't know about this.''

Such direct imports allow consumers to go around Japan's complex and multilayered distribution system. Most goods go through several wholesalers before reaching one of a myriad of retailers, many of them small shops. By the time most foreign imports go through that structure, the prices are often much higher than when bought in the country of manufacture. The same system is also responsible for the prices of Japanese-made goods, which can often be purchased abroad for less.

Consumers are often aware of the cause of their woes, but they are reluctant to assault a system that many contend also provides social stability. The distribution system, based on some 1.6 million retailers, is often described by economic analysts as a disguised form of unemployment.

``I admit prices are high, but it cannot be helped,'' says Nobuyuki Ihara, a university student who plans to start importing. ``It will take so long to change the distribution system. But if it's changed too quickly, it may deprive many people of their jobs.

``Though things are expensive here, the number of jobless people is small and it's peaceful in this country,'' Mr. Ihara argues. ``It's much better than a nation where there are lots of crimes but things are cheaper, isn't it?''

Japanese consumers, as many exporters have found, are highly quality conscious and do not necessarily leap at something simply because it is inexpensive. The image of quality associated worldwide with Japanese products often acts as a psychological barrier against imported goods.

``For the time being, I'll buy something safer,'' says a salaried worker shopping at Inbix Company, a discount store specializing in products from the newly industrialized countries (NIC) of Asia, such as South Korea. Such stores have sprung up in the last couple of years as imports of manufactured goods such as televisions, videocassette recorders, and clothes from Japan's Asian neighbors have risen sharply.

``The problem is how to change the consumers' image about NIC products from something cheap and bad into one that is cheap and good,'' says Michinori Mimura, general manager of the Tokyo-based firm. ``Otherwise, they will continue to think it's OK if Japanese-made products cost more because of their [high] quality.''

A supplier of American beef also suffers from a fixed image that imported beef is cheaper but tough and not so tasty.

``We have lowered the price, which was already cheap enough in this country, but it did not boost the amount of beef purchased by customers,'' says Hiroshi Suzuki, store manager of Bull Boy. ``It seems that consumers think beef with lower prices tastes worse.''

Japanese consumer organizations have almost entirely avoided taking up the issue of the country's high prices. One such group complains that there is no organization to check the quality of products objectively.

``Since there is no checking organization, it's hard for us to lodge a complaint [about prices],'' says Shigeo Oshima, secretary-general of the National Liaison Committee of Consumers' Organization.

``The government talks about the price gap between Japan and foreign countries,'' says Mr. Oshima. ``It does so so that consumers will not look at real reasons behind their tight family budget,'' he contends, pointing to high land prices and education fees, and the lack of social welfare system.

The Japan Housewives' Association is also unwilling to start a movement to call for lower-priced food, such as beef, rice, and fish.

``Since average spending on food in the total daily expenses account for just 23 percent, it will not make much difference if those prices lower a little,'' says Hatoko Shimizu, the association's secretary-general. ``And we can go for pork and chicken instead of expensive beef.''

Her organization favors lower taxes and public-utility charges that weigh heavily on the budget. But such groups have little power, and the ruling conservative party heavily depends on support from farmers and small shopkeepers who strongly oppose efforts to reform the price and distribution system. Increasingly housewives are looking for organizations that will really speak for them.

``Each housewife is tied up in managing on a daily budget,'' complains Utako Kato, who spends some 40 percent of her budget on food. ``When we want to get lower prices, we cannot find an organizer that leads us into a movement.''

The president of Daiei, Japan's equivalent of Sears, says he thinks deregulation and distribution reforms are necessary to bring relief to Japan's beleaguered consumers.

``We cannot expect a quick reform,'' laments Isao Nakauchi. ``For such a thing to happen, an uprising like that in Beijing would have to occur. But there's no such energy in Japan.''

(Other aspects of Japan's distribution system were examined in articles on this page on June 16.)

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