This is just a normal effect of their macroeconomic woes. Their money supply is contracting because despite building every bridge to nowhere they could no one wants to take out loans. They have a crushing burden of debt now having followed all the advice of those who argue for massive stimulus (though even though their stimulus programs have been massive the economists insist it isn't enough).
The only upside to a depression is that prices fall for those who still have jobs and this is just that coming home for people. If that means that prices everywhere have to fall then all the better. The market is trying to heal itself and correct the imbalances and the government really needs to start letting it.
It's not like anything they've done has done much good for anyone-outside the bridge to nowhere supported industries that is. I'm pretty sure we're going to see falling prices here for years to come too as the money supply continues to shrink.
Is there any reasons why the Japanese government stubbornly stick to supporting the "Bridge to Nowhere" project instead of trying other solutions for fixing the economy, including doing nothing?
Doing nothing seems so counterintuitive a solution that people almost never seem to consider it. Lately, I've been seeing this in college. "What, the students are making mistakes and asking questions? I'd better lecture more and write longer explanations in the assignments."
I imagine that a politician who ran on a platform of, "I'm going to do nothing: these kinds of pains are how an economy gets back into adjustment," would have a hard time getting votes. But, I've never been to Japan, and indeed, in the U.S., such a platform would not make you an instant laughingstock.
"set off the price war by cutting the price of its standard beef bowl to 320 yen, or $3.55"
In the US fast food restaurants all include a "99c" menu. You can get burger, fries and soda for $3. Seems like $3.55 isn't a shocking amount for a leading fast food chain.
Certainly the margins on a beef bowl are different than a burger and fries, but it struck me that these amounts aren't as low as I expected give that it's becoming national news in Japan.
I live in Tokyo right now. Tried to setup a HN Tokyo GT, but that didn't work out :/
You can eat at McD's for 100 yen, maybe 350 yen for a happy meal. I used to get by on McDs during my ultra poor initial few months in Tokyo.
As for eating properly; I usually eat for about 1000 yen when I go out, as I know a lot of the decent / cheap places. However, step into any reasonable restaurant and you're likely to be hit with sticker shock. I don't think it is really possible to eat healthy for less than 2000 yen per person without having extensive local knowledge.
As for the deflation story..
Commodities and groceries cost more than they did 2 or 3 years ago. Cheese, for example, costs almost twice what it did when I first arrived in this country (2.5 years back). Living space is at a premium in Tokyo. The apartment renting scene is as shark-infested as ever. The monthly price was more or less the same as it was last few years, and they basically wanted 6 months pre-payment for anything built since 1980.
The Japanese media has been hyping deflation, but the only deflation I see is in salaries. Whether it is anime artists getting by on as little as 100,000 yen a month in Tokyo (!) or my girlfriend working 15 hours a day without overtime (for Proto corporation, the media conglomerate that did Goonet), it seems everyone "normal" is making less. (This might be quite different outside Tokyo, as most other prefectures have been losing population this entire time.)
As for myself? Oddly the economy is picking up for me.
Restaurants that sell cheap meals, like bowls of beef and rice, are lowering prices. The expectation of cheap food is causing other restaurants to seem too expensive, which may cause them to lower prices as well. The lower prices leads to lower revenue which leads to less money to cycle back into the economy. A recession occurs.
"The lower prices leads to lower revenue which leads to less money to cycle back into the economy." How so? The customer still has that money, and will likely spend it on something else. Either by going out to eat more often, buying that new HDTV, or taking the kids to a sports game. I fail to see how that money doesn't end up cycling back into the economy. Unless we are to presume the money saved is hidden under a mattress...
Let's say you operate a business in a deflationary economy, such as Japan. Deflation --> Prices go down.
Yes, consumers will be paying less for goods, this is true, and on the surface seems good, but dig a little deeper. When deflation strikes an economy, almost all businesses are affected. That is why economists worry so much about it and are willing to use inflation to combat deflation.
Think about it: The beef bowl restaurant has lower prices, so they make less money. They will be unable to keep on as many employees, they won't have the excess capital to use for expansion, they will have less money to give suppliers, might not be able to pay rent... employees who are fired will be without incomes so they wont be able to take advantage of lowered prices. These are the ripple effects you need to look at.
The reason people fear deflation is because it is able to rapidly spread throughout the economy and infect almost any business.
I believe the specific scenario being worried about is the following:
People are not going out to eat more often or buying that HDTV. Instead, they are saving the money. Normally this would stimulate investment, but due to uncertainty no one is borrowing.
I don't know if this is correct, but it seems to be the worry. There also seem to be some cultural attitudes at play: "When you buy something cheap, you lower the value of your own life."
The restaurant chains insist they have not downsized their portions, and will make up for cheaper prices by raising efficiency.
This may also be simple captitalism at work. Restaurants are being forced to become more efficient and competitive to attract customers.
People save money on food and therefore have more disposable income to spend in other areas of the economy. So it's not necessarily a lose-lose situation.
I'm not sure what the broken window fallacy has to do with anything.
As for technology, see the comments in the article by economists about the difference between lowering prices based on improved productivity (good) and just lower demand (bad).
I read this as, "As an owner of a restaurant, I expect an x% profit margin. My friends down the street, however, seem to be happy with less. This means that I now only get an x-y% profit margin, and that means I have to trade in my 767 for a Gulfstream V. Clearly those damn consumers don't know what's good for them, and this is going to ruin the economy again. I say this as a completely unbiased neutral party who is deeply concerned with society in general, and certainly not because I want to keep my artificially high profit margin and the luxuries it affords me."
The only upside to a depression is that prices fall for those who still have jobs and this is just that coming home for people. If that means that prices everywhere have to fall then all the better. The market is trying to heal itself and correct the imbalances and the government really needs to start letting it.
It's not like anything they've done has done much good for anyone-outside the bridge to nowhere supported industries that is. I'm pretty sure we're going to see falling prices here for years to come too as the money supply continues to shrink.