GO TO COSTCO TO UNDERSTAND JAPAN’S CRISIS

 

The Japanese economy is in trouble (which economy isn’t?). You never hear about it unless you seek the information for a few reasons; the Japanese like to keep their problems to themselves, the lack of immigrants means that no one abroad pays close attention as they don’t have family trying to carve out a new life in Japan and Japanese debt is held by Japanese.

So why is it in trouble? I reflected on that as I exited Costco a few weekends ago with my son’s English paper top of mind (He is writing on the economic crisis and we had been discussing supply/demand, the impact of consumer confidence on the economy and the downward spiral that leads to a recession).

In North America you exit a Costco with your fellow shoppers sharing a common concern: how the heck am I going to fit all of this stuff in my vehicle?

In Japan, there are a few of us with a full trolley, but many others are exiting with half a trolley full or more commonly only a few items. How many times in North America do you see someone exit a Costco with 4 items? Almost never …

Also, I have yet to see a single person wrestling out one of those impulses items that stock the middle of the floor of Costco. You know, the items you see couples “discussing” all the time in North America. It goes something like this:

“But we came in here for a brick of cheese and milk. Nothing else.”

“I know. I know. It sounds crazy. But at that price, how can we not buy the trampoline?”

In North America you enter a Costco thinking that you will spend $50 and leave spending $900.

The new Prime Minister is keen on kick starting the economy and getting out of deflation. He has launched another huge debt incurring public works program after a big debt year and is pushing the bank of Japan to weaken the Yen to encourage exports.

But it might not be enough. Economies are fuelled by consumer confidence and spending. If Costco is an indicator … Japanese consumers need to spend more. The question is, can they afford it when living in the most expensive city in the world?

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