Youth in Japan not spending enough to boost growth

Millennials used to stagnant wages, lack of job stability are determined to save

TOKYO • Japan's millennials have grown up in an economy that never seems to grow.

Accustomed to stagnant wages, jobs without benefits and a debt-burdened government, they came of age during the global financial crisis and the 2011 tsunami and nuclear disaster - events that set them apart from other generations, especially in their spending patterns.

That carries grave portents for Japan's economic policymakers, hampering their ability to spur consumption and lift the world's third-largest economy from decades of tepid growth and deflation.

The millennials will form a large part of Japan's consumer society for decades to come, and their first instinct is to save, not spend. If they spend, they hunt for bargains. They do not need cars and shun brand-name clothing, coveted by their parents in the booming 1980s.

"I want to lead a minimalist life. I have no desire to buy things," said 19-year-old Kaoruko Shimada.

"Even if money falls from the sky, I wouldn't spend it."

Millennials in other developed countries also show a reluctance to spend. But it is a particularly serious economic problem for Japan: Its population is shrinking, and each household is spending less.

These youngsters "have spent almost their entire lives in the 'lost decades'," said Mr Yusuke Shimoda, an economist at the Japan Research Institute, referring to the years since around 1990 that have been largely shaped by growth that has been fitful at best and flat or falling prices. "This psychological impact is larger than in other countries," he said.

Since Prime Minister Shinzo Abe took power four years ago, Japan has had some of the most aggressive stimulus policies in the world.

Mr Abe's government has spent over 20 trillion yen (S$249 billion) in stimulus measures, and the Bank of Japan (BOJ) has pumped 280 trillion yen into the economy. They have repeatedly urged firms to raise wages and the BOJ has lowered short-term interest rates to below zero.

Despite such unprecedented measures, private consumption - about 60 per cent of Japan's gross domestic product - remains low. Young people are reluctant to spend because of stagnant wages and a lack of stable jobs. Nearly 30 per cent of contract workers aged 25-34 said last year they settled on temporary jobs as they could not find permanent ones, showed a government survey.

Mr Abe has been campaigning to correct the wage disparity between regular workers and contract workers - who make up almost 40 per cent of the labour force - hoping this would boost spending. But raising pay might not be enough. "If we got paid more, we'd probably save for the future rather than spend," said consultant Miki Sarumaru, 26.

Across all ages, Japanese people are spending less, with the biggest drop coming among the youth. Households with heads who are aged 25 or below spent on average 150,547 yen a month in 2014, about 30 per cent less than five years earlier. Family spending has been falling since March this year, dropping 0.4 per cent in October, according to separate government data.

Japan is also getting hammered at the other end of the demographic curve, by the elderly who worry their pensions may not last.

"After I retired, I became very sensitive to prices," said Mr Masao Kawahara, 64, a former advertising agent who switched to car-sharing this year.

Trying to get by with spending as little as possible has become the norm, says analyst Tomoki Inoue, at NLI Research Institute, who studies consumer behaviour.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 10, 2016, with the headline 'Youth in Japan not spending enough to boost growth'. Print Edition | Subscribe