One day at a bank branch office, an old lady rushed up to the counter desk as soon as her turn came. “I want to change my US dollar deposits to Japanese yen. I really need to do it!” The old lady said, pointing to the electric display of foreign currency exchange rates on the wall.
The influence of the U.S. subprime loan crisis on the Japanese economy is much greater than initially estimated. A Financial
Services Agency (FSA) survey, which was released last November, showed the financial losses among large Japanese banks were 1.2 trillion yen as of the end of September 2007. However, at the press release on January 17th the head of the FSA said that Japanese banks’ subprime valuation losses have expanded since then. In fact, Sumitomo Mitsui Financial announced on January 29th that the group had a 59 percent decline in second-quarter profit associated with U.S. mortgage investment losses.
INSIGHTS OUT – The influence of the crisis on Japanese attitudes
The influence of the U.S. subprime loan crisis is not limited to the economy, but also Japanese attitudes on personal financial assets.
1. “Saving for a rainy day”
Since the subprime loan crisis, foreign currency trading and stock investments among Japanese are not as hot as before. Japanese appear to be keeping their money in their deposits without engaging in any active investments. Japanese stock prices have experienced a downward trend or have maintained similar price ranges, although there are unexpected daily fluctuations. Recently, total deposit amounts among Japanese banks have seen a slight increase. According to the Japanese Bankers Association, the total deposit amounts among Japanese banks in December 2007 increased 2.1% from the previous year. Quite clearly, interest rates for bank deposits are NOT altered for the increase, as even the interest rate for 10-year deposits in yen is below 1%.
2. Shopping without borrowing
Furthermore, Japanese have seemed to become less reliant on loans for shopping. Statistics from the Japanese Consumer Credit Industry Association shows that the total amount of consumer loan shopping in 2007 saw a 1.4% decrease from the previous year, while credit card shopping saw a 10.3% increase. Japanese consumers, therefore, use credit cards for cashless shopping, not borrowing.
The subprime loan crisis in the U.S. appears to have brought back Japanese investment attitudes: risk-averse and conservative. Also, we are not certain how the outlook of the Japanese economy will be over the coming year. But who knows? Right now, what is certain is that most Japanese are worried about possible uncertainty of the Japanese economy in the future.
February 01 2008 | Economy | 4 Comments »
By just walking on the streets, with all their glittering lights, you may not believe that poverty exists in Japan. The working poor have received a lot of media attention, especially last year when NHK broadcasted a series of special television programmes about the working poor. The working poor have had the public’s attention again due to the recent economic anxieties in Japan.
Increase of working poor, little by little
The working poor, who are also called ‘Wa-kingu pua’ in Japanese, are individuals and families who maintain their employment, but remain in poverty because they receive a low income. There are no official definitions of poverty in Japan. However, low average income is often used as one of the measures of poverty. According to the National Livelihood Survey, in 2006 18.9% received 2 million yen as their annual income, where the average annual income was 5,64million yen.
More income inequality between the poor and the rich
While there has been an increase in the population of those on a low income, the population of rich people has increased, especially after the economic bubble burst. According to the OECD working paper published in 2007, the Gini coefficient, which is a common measure of household income inequality, rose for the total Japanese population by 9.4 percentage points from the mid-1980s to 2000, a large increase compared to the OECD average of 4.3 percentage points. This means that the saying ‘all Japanese have money’ is not true anymore.
Insights out – More marketing attention to the rich, but likely to be little to the poor
Many companies have been focusing on the rich, and/or Baby Boomers, who have a large amount of retirement money. Many financial institutions provide asset management consultation services, such as private banking services for ‘fuyuusou’ (the rich). There also many marketing services that target the rich, such as ‘YUKASEE’, the premium SNSs limited for the rich, and direct market services for companies who target the rich. The market for the rich seems to be getting overcrowded. However, do business opportunities exist just for the rich?
Paradox shift – Not economic burden but potential business opportunities
Those on a low income could provide potential opportunities for wealth creation in Japan. As C. Prahalad indicated in the book ‘The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits’, we should stop thinking that the poor are victims, rather they are ‘value-conscious consumers’. There may be various approaches that companies could take, particularly as part of their corporate social responsibilities.
The working poor are not just a matter for the government and public sectors to deal with. I believe that companies who succeed in the market could benefit from the working poor not only financially, but also socially.
January 18 2008 | Economy | 2 Comments »
