Food & Drink

Are bargain burgers quickening Japan's deflationary tailspin?

by Shoko Oda and Grace Huang

Bloomberg

Fast-food lunches in Japan are starting to get cheaper as consumers look to trim their dining expenses, a worrying sign for the central bank as it tries to bring about inflation.

Japan’s fast-food chains have lowered menu prices over the past six months, with McDonald’s Japan, Burger King Japan and Yoshinoya Holdings Co. offering cheaper deals and lunchtime specials.

McDonald’s rolled out a new weekday lunchtime combo set earlier this month, offering a burger and a small-sized drink for ¥400. The new menu follows an all-day, ¥200 burger promotion that the company introduced last October, says company spokeswoman Kokoro Toyama.

“This was very popular with our customers. We’ve expanded options for weekday lunchtime to offer more cost-friendly, convenient menu options,” she says.

It’s hard to predict whether prices will continue to fall, but there are signs that a deflationary mindset is taking hold among consumers says Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities Co.

“Gasoline and other energy-related prices are falling, which makes it easier for the restaurant sector to lower their prices as well,” Miyazaki says.

“I think people would find these ¥400 lunchtime sets pretty helpful,” says Kazuomi Nishiki, a 42-year-old employee at a real estate company who ate at McDonald’s in early September. “Stock prices may double but since individual income isn’t rising, people are attracted to cheaper options.”

In May, Burger King introduced a ¥490 meal set complete with a burger, small fries and a drink. In April, Beef bowl chain Yoshinoya brought back its pork bowl, priced ¥50 cheaper than its beef counterpart. A month earlier, Sushi restaurant chain Kappa-sushi began a campaign to cut the price on its ¥108 sushi dishes to ¥97 on weekdays, according to Kyodo News.

Yoshinoya revived the cheaper pork bowls, originally served as a substitute during the mad cow scare in the early 2000s, based on customer demand, according to a company spokesperson who declined to be identified, citing company policy.

McDonald’s Japan, whose sales bounced back in the April-June quarter after a series of food scandals, made headlines in the mid-’90s when it rolled out a series of discount campaigns that triggered price cuts at other restaurant chains. Those price cuts came as Japan headed into deflation following the bursting of the bubble economy, something it has yet to fully recover from.

Deflationary pressures in the fast food industry will likely persist in the foreseeable future, says Mitsushige Akino, an executive officer at Ichiyoshi Asset Management. Restaurants will thus face a period of cut-throat competition.

“In the 1990s, when McDonald’s cut prices on its menus, it was a strategic move,” Akino says. “This time it’s for survival. These chains can’t survive unless they go along with the deflationary model.”

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