TOKYO, Nov 25 — In March, low-cost apparel chain Uniqlo rolled out a line of jeans at its discount outlets for the then ridiculously low price of 990 yen (RM37.79) a pair.
Last month, discount retailer Don Quijote began selling its own brand of jeans at the unheard-of price of 690 yen each.
The plunging prices of jeans in recent months epitomise Japan’s latest bout of deflation, which the government officially acknowledged last Friday.
As deflationary winds blow gently through Japan, the complicated task of correcting the negative effects of falling prices of goods and services on the country’s still weak economy is likely to land on the reluctant central bank.
While the government fears that the as yet mild deflationary pressures could lead to something worse, the Bank of Japan (BOJ) has yet to show a similar degree of concern.
Last Friday, the BOJ opted to keep the current key interest rate unchanged, and even upgraded its assessment of the economy.
BOJ governor Masaaki Shirakawa said putting more liquidity into the economy will not be enough to lift prices if overall demand remains sluggish. He urged the government to take measures to build up consumer confidence in the future so as to boost demand.
But Cabinet ministers are growing impatient with the central bank. Deputy Prime Minister Naoto Kan, who oversees the drawing up of government economic policy, said last Friday that he wanted the BOJ to “follow through with its monetary policies”, after declaring the economy was facing deflation.
Finance Minister Hirohisa Fujii agreed. “I support Deputy Prime Minister Kan’s stance that the government will exchange views and find a solution with the BOJ,” he told reporters yesterday.
Financial Services Minister Shizuka Kamei joined in, saying deflation was getting “very severe”. He told reporters yesterday: “We are closely watching what the BOJ can do in this environment.”
The leading business daily Nikkei said the price decline may be worse than what the government makes it out to be, as the index used to measure price changes does not take into account lower- priced house brand products and special markdowns.
Walk into any major supermarket and one can see shelves stocked with house brand products, as retailers compete for customers with lower prices on many daily necessities.
The government’s fear is that falling prices could mean lower corporate profits and wages, leading to more demand for cheaper products in a vicious circle. With big companies cutting winter bonuses next month by more than 10 per cent and many jobs still under threat, consumer demand can hardly be expected to improve in the short term.
“The BOJ can’t do much about deflation except keep interest rates low. Unless the job situation improves, we cannot shake off deflation,” said senior economist Hideo Kumano of the Dai-ichi Life Research Institute.
The government is also under pressure to introduce more stimulus measures to boost demand, such as tax breaks not only for buying eco-friendly cars but also eco-friendly houses. But the government’s hands are tied as it risks further increasing Japan’s already giant national debt if additional measures mean issuing even more national bonds.
There are few winners in the continuing price wars. One of them is Uniqlo, which last weekend saw its outlets nationwide swamped with customers as it slashed prices to celebrate the 60th anniversary of Fast Retailing, which manages the chain.
When sparking the price war on jeans earlier this year with his 990 yen product, Fast Retailing boss Tadashi Yanai said jokingly that jeans might ultimately cost nothing.
Last month, his words came true as a rival chain specialising in jeans gave away 100 pairs of Levi’s and other brand-name jeans every day for four days at several outlets, just to draw customers.
With Japanese consumers these days spending less, especially on brand-name products, among the biggest losers have been department stores, some of which are planning to launch winter sales from next month, instead of after the New Year as in past years. — The Straits Times
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