In Japan, mounting anger over bread-and-butter issues

Rising prices, shortages of food items, and political gridlock spur calls for a quick election.

from the May 8, 2008 edition

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"Those hardest hit are the poorest segments of the population, especially the urban poor," said Mr. Nukaga, quoted by Reuters. "It will have a negative impact on their living standards and their nutrition, a situation that may lead to social unrest and distrust."

He and other leaders backed an ADB strategy to give low-cost credit and technical assistance to boost agricultural production to meet rising demand.

At home, after six straight months of rising consumer prices, the Bank of Japan last week reduced its growth forecast to 1.5 percent for the year started April from 2.1 percent.

"The current rise [of prices] is of an undesirable nature. It is not being caused by stronger consumption demand but by higher costs," Economy Minister Hiroko Ota said recently. "Consumption demand is likely to remain weak because workers' wages are not picking up."

Average consumer prices recorded in March increased by 1.2 percent compared with levels a year earlier, according to Statistics Bureau figures. It said food costs rose 1.6 percent, while fuel, light, and water charges climbed 4.2 percent.

"This increase is small by comparison to levels in foreign countries. But this is a major rise in Japan," says Yoshiki Shinke, a researcher at Dai-Ichi Life Research Institute in Tokyo. "Wages are still not increasing. So when combined with price rises, this has a big influence on consumers, especially on people with lower income levels. Consumer confidence is plummeting across the board."

A wide range of retailers are reporting losses. Major beermaker Kirin's stock value dropped the most in a decade after it said on Wednesday that its first-quarter operating profit fell 46 percent because of rising material costs and lower sales at its soft-drink division. Department stores also reported declining revenues in March.

Last year, Japan's vehicle sales, excluding minicars, fell to their lowest level in 35 years. Vehicle sales this year, including minicars, will likely fall 1.2 percent for the fourth year in a row to about 5.32 million, according to the Japan Automobile Manufacturers Association.

The consumer mood shift is manifested in part in changing shopping habits. While department stores report declining revenues as demand falls, small-scale designers and shops continue to sprout up in the youth fashion mecca of Shibuya in Tokyo. The value of online shopping, meanwhile, continues to grow, up 9.5 percent to 3.7 trillion yen ($35 billion) in the year ending March 2007, according to the Japan Direct Marketing Association.

This potential for growth in new sectors gives some optimism among the deluge of negative indicators. "If the US economy recovers, and the price of oil decreases, then this might not last very long," says Mr. Shinke. "But if the price of oil continues to rise, and brings the US economy downward with it, there will continue to be a negative impact on Japan."

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