On The Ground In Greater Tokyo
Risk Watchdog has just returned from Greater Tokyo, where I spent a week trying to get a handle on what’s happening in Japan. Regular readers will recall that I have generally been bearish on Japan’s economy, so this was a good opportunity for a first-hand refresher.
I say ‘Greater Tokyo’, because I also visited Tokyo’s neighbouring port city of Yokohama as well as some of Tokyo’s satellite towns and cities. According to UN figures, this megalopolis is the world’s largest urban agglomeration with 35.7 million people (2007), or more than a quarter of the national total. Of course, Greater Tokyo is not Japan, just as London is not the UK and New York is not the USA. Nonetheless, I think biggest cities can still offer some clues as to national conditions.
I should mention that I have been to Tokyo/Japan many times over the past 30 years, and as such, nothing was radically new to me on this trip. Thus, the observations I make below are largely intended for those less familiar with the country.
Narita Airport: Tokyo’s Narita Airport has long been one of my pet peeves in global travel. The problem is that it is more than 60km outside downtown Tokyo – one of the longest distances between the main airport and city centre of any metropolis on earth – due to land shortages. It takes well over an hour to get into the city, and costs JPY2,940 (GBP20.56) by Narita Express train. The cost is favourable compared to London’s Heathrow Express (GBP16.50 for a 15-minute, 22km journey), but I can see how the distance is an annoyance for business (and leisure) travellers. Singapore’s Changi Airport, for example, is only a half-hour, affordable taxi ride into central Singapore.
Tokyo still bustling: Despite the severe recession, Tokyo seemed as busy and hectic as ever. I was half expecting to see department stores or shops boarded up, and legions of homeless wandering the streets. Instead, shops, while not necessarily crowded, were not sitting idle, and restaurants were certainly doing brisk business. There were several instances where I could not get a table at a restaurant in the evenings, or had to wait for fifteen minutes or so.
Again, this is reflective of Tokyo being a big city, but in theory you would expect even big cities to show signs of sluggish demand. For example, the recession in the UK has already forced the end of major retailers such as Woolworths, Zavvi, and most recently Borders. (The latter is preparing to close its second main store in Central London.)
Also, people in Greater Tokyo still seemed well-dressed, with newish-looking clothes, and young people still had their hair well-groomed. Certainly, Tokyo’s hip Harajuku clothes district was seriously crowded on a bank holiday Monday afternoon, though I concede that busy streets do not automatically mean busy shop counters.
Symptoms of recession: Nonetheless, a Japanese friend of mine described to me several symptoms of the recession, even in Greater Tokyo. He said, for example, that there are more vacant spaces at shopping malls than this time last year. He also said that there had been a big wave of lay-offs of part-time or short-term workers by major companies earlier this year, and many of those who had lived in company dormitories had become ‘net café refugees’, that is to say, they sleep at internet cafes, where they look for jobs on the internet. These net cafes are equipped with showers, allowing them to stay clean. (A more detailed story about this ongoing phenomenon was published in The Times in 2007.) My friend added that local media have reported an increase in prostitution among homeless young women.
On the subject of the homeless, I saw fewer homeless people in the Tokyo Metro system than I did five years ago. However, that does not mean that the number is down. One night, while walking in the grey cavernous spaces beneath the twin-towered Tokyo Metropolitan Government Building, I saw many people sleeping rough. Nearby Shinjuku Central Park has also been a refuge for Tokyo’s homeless for several years now.
Youth culture still strong: Despite Japan’s rapidly ageing population, its ‘youth culture’, by which I mean pop music, graphic novels, fashion, and propensity for latest trendy stuff, is still going strong. However, I wonder how long this can last. While 60 may well become the new 40, I cannot see 40 becoming the new 20 under any circumstances. Thus, Japan’s youth culture will need to be exported abroad (or entice visitors from overseas), if it is to survive.
More foreigners visible: I saw more foreigners (Westerners, South Asians, Africans (the latter, Nigerians)) in Greater Tokyo than during my previous visits. It was impossible for me to determine who were long-term residents and who were tourists, but either way, their presence made Tokyo seem more diverse. Going forward, as I have pointed out previously, Japan desperately needs more immigration if it is to offset demographic decline. However, I wonder how much scope for social mobility there is among immigrants, given widespread prejudices. The Nigerians in Tokyo I saw were mostly trying to entice foreigners into girlie bars.
English still not widely understood: Despite Tokyo being a major financial centre, I am always surprised at how few people speak English. Every time I go to Japan, I half expect more people to speak English, but this is not the case. Even people who work in the retail and restaurant trades, taxi drivers, and railway station staff barely speak any English. There are bilingual (Japanese and English) announcements in the Tokyo Metro and JR trains, and ATM and ticket machines have English options, but it is not uncommon to see rail maps entirely in Japanese. Overall, this weakness in English could serve as a major obstacle to Tokyo staying ahead of (or even keeping up with) its competitors as a regional or global financial hub.
Tourism a potential growth driver: Assuming that private consumption remains subdued due to an ageing and shrinking population, Japan will need to rely on tourism to boost its retail and leisure sector (see my previous post on Japan’s tourism potential.) In this regard, China will be crucial. In the hotel I was staying in, all the signage in the rooms and related documents and TV entertainment system were also in Chinese and Korean. The growing Chinese middle class will increasingly take vacations overseas, and Japan needs to cash in on this.
Strong yen/Deflation: The strong yen is a potential threat to tourism growth in the near term. However, even amid a strong yen (JPY143.00/GBP as of today, compared with a range of JPY180-240/GBP for much of this decade), I found Tokyo competitive vis-à-vis London. For example, a pizza Margherita was JPY1,000 (GBP6.99), and so was barbecued marinated beef; a 500ml bottle of water from a vending machine was JPY110 (GBP0.77); a minimum Metro fare was JPY160 (GBP1.12). So overall, Tokyo was expensive, but with quite a few things you get better value for money, such as better public transport, though in some cases food portions were smaller than what I am accustomed to in London.
Deflation, or lack of inflation, was evident in the fact that some items, such as vending machine drinks and Metro ticket prices have been unchanged for as long as I can remember.
Energy efficiency: Recycling is big in Japan. Most public bins have separate receptacles for plastics, glass, paper, and miscellaneous combustibles (though a friend cynically joked that it all ends up in the same landfill in Tokyo Bay). However, there seems to be a tremendous amount of potentially wasteful electricity use in Japan, primarily from ubiquitous brightly-lit vending machines, copious neon signs even in the suburbs, giant TV screens blaring pop music, multiple musical tones at train stations, and even electrically-heated toilet seats. If ever Japan is hit by a true energy crisis, it can weather it by switching off these ‘non-essential’ functions. In fact, I couldn’t help but notice that many of Tokyo’s skyscrapers were mostly darkened at night time, although I could not determine whether this was an energy-saving initiative by companies or if there was much vacant office space.
Christmas in Tokyo: Finally, I should say that Greater Tokyo was fully decked out in Christmas decorations, equal to if not in excess of what we see in London. Yet Christmas is a normal day in Japan. Rather, Christmas in Japan is similar to Valentine’s Day in the West and thus more geared towards couples. Naturally, retailers seek to use the occasion to boost sales.
Conclusion: Overall, despite one-and-a-half lost decades, Greater Tokyo showed very few signs of the decay that one would normally associate with such economic malaise. True, rural areas have been hit much harder, but even so, you would also expect big cities to show more signs of wear and tear. That the country has remained so orderly (though society has been shaken by 10 years in which suicides have topped 30,000 a year) is a testament to its remarkable cohesion.
December 1st, 2009 at 4:30 pm UTC
Risk Watchdog: “I was half expecting to see department stores or shops boarded up, and legions of homeless wandering the streets…. Also, people in Greater Tokyo still seemed well-dressed, with newish-looking clothes, and young people still had their hair well-groomed.”
I’m a bit disappointed that someone as erudite as Risk Watchdog could have possibly imagined that Tokyo would have deteriorated to the point of people wearing rags and not getting hair cuts. Perhaps RW has been unduly influenced by all the hype surrounding forthcoming disaster movies 2012 and ‘The Road’. Japan’s economy may have been moribund for a while, but its still one of the wealthiest societies in the world and as RW pointed out in a previous post, GDP per capita growth has actually been quite healthy for the past decade. I think there’s a lesson to be learned here about economists understanding the real-world implications of the numbers on their spreadsheets!
December 1st, 2009 at 5:46 pm UTC
Many thanks for your comment.
Perhaps I was exaggerating a little bit about expecting Tokyo to be filled with bedraggled and dishevelled citizens… although there is a half-way house between wearing nice new clothes and rags. However, there are certainly places I’ve been to, which have experienced economic malaise, where the people have looked weary or a little worse for wear.
If you want to read a positive spin on the lost decade, I refer you to this article in the FT back in August:
http://www.ft.com/cms/s/0/fca464c0-9659-11de-84d1-00144feabdc0.html?catid=134&SID=google
The writer suggests that far from Japan being a warning to the West of potential adversity, it is actually an inspiring example of how to deal with it.
That said, while it is true that Japan is still very wealthy, its overall ranking in the world’s GDP per capita has slid quite a few places over the past 20 years (although exchange rate variability can swing it a few places up or down).
I agree with you about how economic data often paints a bleaker picture than is visible on the ground. However, in many countries the reverse is also true; data looks good, but citizens are still poor.
As for Japan, perhaps instead of saying 5% are unemployed, we should look at the positive side: 95% of the workforce is employed!