Business | YEN FOR LIVING

Restaurants slash prices and frills as living standard in Japan drops

by Phil Brasor and Masako Tsubuku

Special To The Japan Times

According to statistician Ernst Engel (1821-96), the proportion of a person’s income that is spent on food tends to decline as that person’s income itself rises, even if the amount of money being spent on food increases. Engel’s law is usually used to illustrate the relative living standard of a country. If the portion that the average household spends on food is high, then it means the standard of living is relatively poor, since there is less discretionary income as a result. In other words, the more money you spend on food, the harder it is to get by.

According to Engel’s law, Japan’s standard of living has fallen since 2012, just before the Liberal Democratic Party regained the reins of government. A Ministry of Internal Affairs survey found that the average household in which at least two people live spent 23.5 percent of its income on food. In 2015, this portion had risen to 25 percent. During that time the consumption tax was raised 3 percentage points and the value of the yen dropped against other currencies, thus making imported foods more expensive.

At the same time, salaries did not keep up with the rise in food costs. Between 2012 and 2015, according to the ministry, average wages for “regular employees” rose by 1.7 percent, while the consumer price index (which does not track “fresh food”) rose by 3.9 percent. As a result, “real wages,” which factors in changes in CPI and inflation, actually decreased by 4.6 percent over this three-year period.

Consequently, poorer families spent less money on food in 2015 than they did in 2012, even if a greater portion of their income went toward food. Between 2012 and 2015, the Engel Index for lower-income households in Japan, meaning those that make less than ¥3.34 million a year, increased by 1.6 percentage points. The Engel Index for higher-income households, meaning those that made more than 8.23 million, increased by 1.7 percentage points. The increase was the same, reflecting the rise in prices, but the difference in the 2015 index itself is the important factor: 28.7 percent for lower income households, and only 22.6 for higher income households.

Certain costs of living, such as rent/mortgage payments and utilities, are nonadjustable. Food expenditures, however, can be reduced by cutting out certain items and looking for bargains, which tends to happen with greater frequency as income drops. In an article about household finances in the June 17 Tokyo Shimbun, a 59-year-old homemaker from Kamakura, Kanagawa Prefecture, said she has adjusted to her family’s straitened financial situation by “not buying as much prepared food and not eating out.”

A volunteer for a food bank in Kawasaki told the newspaper that the first thing families usually cut back on when they “fall into poverty” is clothing and household expenses, but the “new poor” — meaning families who are used to a middle-class lifestyle — try to keep up appearances, “so they cut back on food first.” As a researcher for Mizuho Securities told Tokyo Shimbun, people with lower incomes feel more of a burden when food prices rise, and since wages are dropping across the board, Japan’s standard of living is also dropping.

What this means for the future is anybody’s guess, but one thing seems to be certain: Anyone who can sell food more cheaply is enjoying a larger pool of dedicated customers. And that goes for the restaurant business as much as it does for grocery stores — maybe even more so, given the primacy of food culture in Japan.

Take Yoshinoya, the fast food chain that specializes in gyūdon—stewed beef over rice. In April, the company reintroduced butadon —stewed pork over rice — to its menu for the first time in five years. Over a two-month period, the chain sold 10 million butadon meals, boosting sales to a record ¥3.3 billion.

Part of the appeal was nostalgic. Pork bowls were originally put on the menu in 2004 as a substitute for regular beef bowls, which were being discontinued due to the BSE scare in the United States, where Yoshinoya obtained almost all its beef.

Once the ban on American beef was eased, Yoshinoya discontinued pork bowls in December 2011 and resumed beef bowl sales fully. However, prices in the meantime had risen due to the weaker yen and Yoshinoya was forced to increase the price of a standard (nami) meal from ¥280 to ¥300 in April 2014. In December it increased the price again, to ¥380. Year-on-year monthly sales decreased continually until April of this year, when the pork bowl came back. The price? ¥330 including tax, which, according to Sankei Shimbun, is considered cheap right now.

But the chain that has really taken Engel’s law to heart as a business strategy is the relatively new Genkaritsu Kenkyujo, whose very name — which means “Cost Rate Research Center” — reveals its purposes. Genkaritsu sells plates of curry rice for only ¥200. The company has six stores in Niigata Prefecture and earlier this year launched a shop in the Takenozuka area of Tokyo. The place has been mobbed since it opened, despite the fact that the decor is homely (the company’s budget for a new outlet is limited to ¥500,000), there is no free water and curry rice is all you get. The company’s management says it plans to open 1,000 more stores nationwide.

This being Japan, fast food does not automatically mean inferior food. Japanese consumers, even those with limited means, tend to demand good food almost as a matter of pride. McDonald’s understands this, and in order to reinvigorate its customer base recently introduced several new items specially designed for the Japanese market.

Popular TV economist Takuro Morinaga, who is known as something of a gourmand, was talking about Yoshinoya’s improved fortunes on TBS radio recently and declared its butadon to be “very delicious,” so it’s not as if leaner circumstances mean bad cuisine. It just means restaurants have to be more clever about prices.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month. For related online content, see blog.japantimes.co.jp/yen-for-living.