The Thrifty Japanese Turn Into Consumers

What word best describes the Japanese people today? Prosperous. Masses of them are highly paid, many are truly rich--and that’s a fact to keep in mind because it offers clues to where this important nation of 122 million people is going in the next five years.

First some paychecks. There have been many reports about Tokyo’s high food prices--$10 a pound for beefsteak, $60 honeydew melons--but less mention of its high salaries. The Japanese middle class is doing well. Office workers at large firms can make $50,000 a year; department heads are good for $100,000.

Those are not isolated cases: The average annual household income in Japan today is $40,000--well above the U.S. average.

Then there are the land and homeowners. Tokyo, a city of 11 million people, is like a giant Greenwich, Conn., or Beverly Hills--in terms of real estate prices, not spacious accommodation. Any condominium within six miles of the city center is worth at least $1 million. Stories like that of the barber who sold his tiny shop--and land--for $7.5 million are common.

If you go outside the city and commute 1 1/2 hours to your job--as millions do--you’re looking at $400,000 for a two-bedroom house.

There are those who say Japanese real estate is a bubble soon to burst. But that is unlikely. The people’s savings accounts are too real--average household savings is now 8 million yen, or $66,000--and the history behind them too deep. The government feels an obligation to those savers that goes back to the postwar period.

Millions of people were hungry and unemployed. Land reform, imposed by the U.S. occupation forces, took farms away from absentee landlords in Tokyo and gave them to tenant farmers, who immediately set to solving the food problem. (It is some of those farms--now grown to enormous value--that are involved in today’s U.S.-Japan arguments over agricultural imports.)

Then, as industry restarted, government policies decreed lifetime employment and encouraged massive savings of the paychecks, which helped to finance the growth of industry.

The whole system discouraged the consumer society, which is why apartments are small and Japan’s wealthy middle class endures a lower standard of living. “Japan’s economy may be comparable to that of America,” remarks one Japanese banker, “but the people’s standard of living is more like that of Singapore.”

Establishment Listening

But that is about to change, and that’s the first clue to what will happen in Japan in the next few years. People with money to spend are demanding the opportunity to spend it--to have a shorter commute to work and better housing.

The Establishment is listening. Last week in Tokyo, the head of the Japan Chamber of Commerce, Rokuro Ishikawa, a politically well-connected leader of the construction industry, spoke of plans to move government offices from Tokyo to outlying areas, to ease congestion by building up the suburbs.

Ishikawa did not speak, as Japanese businessmen used to do, of the strong yen’s blow to exports but of the buying power it brings to the Japanese people.

Simply put, Japan is about to build and enjoy a suburban life style, as America did in the 1950s. Already housing starts in Japan, at 1.4 million a year, are comparable to the U.S. rate. And the talk is of the growth of gaishoku, or eating out, as restaurants spring up to cater to young marrieds who like to dine out once a week.

It’s a prosperous country today. But notice those land prices, and the salaries--because they are the second clue to what lies ahead. This is a high-cost country. Maybe Japan is still competitive in some of its highly organized manufacturing, but inefficiencies are creeping in.

Japan has decided not to go for lowest cost. It is not going to import foreign workers for all the construction and home building to be done--it is not a country that welcomes immigrants. High-paid Japanese workers will be used. And the distortions caused by high land prices and protected agriculture--making shoppers pay more for rice and $10 to $15 a pound for fish, the staples of the Japanese diet--will be unwound very gradually.

And that means the big, efficient Japanese firms, to be competitive in world markets, will set up many operations elsewhere--prominently in the United States. This is a threat to nobody--for only the best Japanese companies will succeed in the competitive U.S. market, while most will fall back on the comforts of home, where they can still make a profit sheltered from the effects of strong currency and high costs at headquarters.

What’s ahead for the prosperous Japanese? It would be a mistake to underestimate the resilience or the technological abilities of its great companies. But back in the early 1960s, prosperity such as Japan enjoys today dulled the edge of America’s business people. And now maybe the hard-working Japanese, too, are going to get a little fat.