Is Japan’s Economy Really in Trouble? Thoughts Over a Beef Bowl After Giving Up on Sushi

“Japan is finished.”

You can find that claim everywhere online.

Listen to economists, however, and a somewhat different picture emerges.

The prevailing view is that the weak yen reflects the interest-rate gap between Japan and the United States more than the collapse of Japan’s economy.

Corporate performance is not particularly poor, either.

Many companies, especially exporters, have reported record profits, while stock prices remain high.

Foreign institutional investors have also been net buyers of Japanese stocks.

They invest professionally. If they truly believed that Japan’s economy was finished, they would hardly be buying Japanese equities.

In other words, when we look only at the macroeconomy, there is plenty of evidence for the argument that Japan is not doing as badly as many people think.

But Daily Life Feels Completely Different

The other day, I decided to have sushi for lunch for the first time in a while.

I walked to the restaurant and looked at the menu outside.

I stopped.

“Was it always this expensive?”

I remembered the lunch costing a little over ¥1,000, or roughly $7. Before I knew it, the price had risen by 50 percent. At some restaurants, it was nearly twice as much.

After staring at the menu for a while, I quietly turned around.

A few minutes later, I was eating gyudon, a Japanese beef bowl, at a nearby restaurant.

It is not that I dislike gyudon.

I had simply intended to eat sushi that day.

Even so, I found myself deciding almost unconsciously, “Not today.”

Small moments like this may be what create the feeling that the economy is supposedly doing well while everyday life is becoming harder.

The Economy and Economic Sentiment Are Not the Same

What is interesting is that economics often treats economic conditions and people’s perception of those conditions as two different things.

Even if GDP grows and corporate profits rise, people do not necessarily feel wealthier.

Behavioral economics offers the concept of loss aversion.

People tend to feel the pain of a loss several times more strongly than the pleasure of an equivalent gain.

For example, even if someone’s monthly salary rises by ¥10,000, or about $67, the resulting happiness may not last very long.

The stress of noticing yet another price increase during everyday shopping, however, occurs again and again.

So even if statistical income is rising, it is not psychologically surprising that more people feel their lives have become harder.

Prices Rise Today, but Income Catches Up Later

There is another issue.

When a company reports record profits, those profits do not automatically appear in employees’ salaries the following month.

The money may go toward capital investment or dividends to shareholders.

Not everyone’s income rises immediately.

Employees at large companies may benefit relatively quickly through bonuses or pay increases negotiated during Japan’s annual spring wage talks.

But a pensioner’s payments will not increase tomorrow.

The same is true for freelancers like me who work under long-term contracts.

In the middle of a contract, it is difficult to say, “Prices have gone up, so please raise my rate starting next month.”

Often, there is no choice but to wait until the next contract renewal.

In other words, prices rise today, while many people’s income does not increase until six months, a year, or even longer afterward.

Exporters may increase their profits because of the weak yen, but it takes time for those benefits to reach the amount people can spend on lunch.

This creates an apparently contradictory situation: stock prices rise while more people worry about the cost of a meal.

Even I hesitate over whether to buy sushi.

How, then, are younger people or those living on incomes close to the minimum wage coping with these higher prices?

News reports show figures such as “record corporate profits” and “wages up by X percent.”

Those figures are real.

But it is also real that more people sigh when they see the prices at supermarkets and restaurants.

Maybe “Is the Economy Good or Bad?” Is the Wrong Question

In the end, perhaps the question “Is Japan’s economy good or bad?” is itself too crude.

The macroeconomy is strong.

Corporate earnings are strong.

Stock prices are high.

All of that is probably true.

But that day, I ate a beef bowl instead of sushi.

For me, that says everything about how the economy feels.