OFF INTO THE WILD WET YONDER How does this...
Uniqlo Raises Its Prices, Japan’s Leaders Rejoice
Nikkei Asian Review is reporting that Japan’s Uniqlo Co., Ltd. is set to raise prices on its clothing line for the first time ever in Japan. For those unfamiliar, Uniqlo is the Japan-born equivalent of the United States’ Old Navy, and whose concept is basic, inexpensive, and stylish (depending on who you ask) clothes for the entire family. In recent years, the company has been making the jump to overseas markets.
The clothing retailer says the increase will be approximately 5%, and explains that the move was inevitable due to higher material costs and the weaker yen.
The increase will take effect next month at all of its Japan locations.
A number of Japan’s leaders are no doubt pleased with this news, as the move is reflective of the approaches and polices that the government has been taking to pull the country out of deflation.
Many, myself included, question the supply-side policies that have been administered by the government and the Bank of Japan (BOJ) over the years. Most, if not all, appear to be nothing more than gifts to Japan Inc.’s remaining dinosaurs. How else can one explain such bold initiatives over the past decade like the privatization and chopping up of the world’s largest savings institution (Japan Post), the country’s massive debt bubble, quantitative easing (QE) that has made ex-Federal Reserve Chairman Bernanke proud, and now plans to cut corporate taxes.
The largest custodian of personal savings in the world, the Japan Post, managed a staggering ¥224 trillion (US$2.1 trillion) in savings accounts and another ¥126 trillion (US$1.2 trillion) in its life insurance services, as well as held approximately ¥140 trillion (US$1.4 trillion) in government bonds. Now defunct, and broken up into four separate units, the holdings company was recently ranked 13th in the Fortune Global 500 list of the world’s largest companies.
Is privatization bad? Of course not. But the timing of this seemed to coincide (all too conveniently) with an aging and unpopular Japanese Liberal Democratic Party, as well as a stagnated, dried up, and inefficient Japan Inc., which really needed a thorough house cleaning instead of simply more liquidity to prop up the seriously archaic business models that persist today.
If these policies have shown anything over the years, it’s that the government doesn’t seem to care all that much about its citizens’ savings accounts or the salaries of its salarymen… the only noticeable concern seems to be on the stock market and making sure Japan’s corporatism remains strong. A “bubbly” stock market is their indicator of a healthy society, never mind if that market is getting drunk and fat on cheap money and easy credit (the GMO of economic policies).
A strong and vibrant stock market, what’s not to like about that? It seems necessary, though, to point out that pumping digital fiat money into the markets and calling it economic prosperity is disingenuous, and is clearly failing. Propping up the stock market is great news if you’re short-sighted, but the long-term economic reality is that it’s cutting off its nose to spite its face. Inflation might be good for stocks, but it’s ultimately bad for consumers whose wages are lagging far behind.
So all of this QE has finely dug its teeth into Japan’s largest clothing retailer… how will consumers react when their wages remain stuck in neutral?
A pair of Uniqlo jeans priced at ¥2,848 (US$28) will now be ¥2,990, and a t-shirt that sold for ¥943 will increase to ¥990. Seeing it spelled out here like that it probably doesn’t seem that terrible, or even that big of a deal. Yet a beginning salaryman working for a small company with two kids and a wife at home might disagree. Taken into account along with the recent nationwide consumption tax increase from 5% to 8%, now those basic and inexpensive jeans start to look nearly “designer” at ¥3230.
Speaking of quality, the Nikkei Asian Review also raises the point, will the products still be worth it? I’m a big fan of Uniqlo’s t-shirt quality. It actually happens to be one of my favorites. Their paper-thin denim jeans? I’ll pass, especially since now you can get better quality overseas at almost the same price.
The company claims that the increase will result in better quality and higher-performance products, with a spokesperson saying that it was targeted at “meeting our customers’ expectations of higher product quality.” But I thought their customer base (again, myself included) expected lower quality and relative prices? Why not just continue to make the same products at the same prices?
Their statement seems akin to a snack company pumping more air into its bags of chips while at the same time removing a few, and then putting them out on shelves for consumers. “Nothing to see here, pay and move along.”
What we’re witnessing in Japan is an unprecedented dilution and tampering of the quality of a country’s economy, currency, credit, and society. The more easing the BOJ does the more it exasperates those paper-thin jeans and the (hot) air being pumped into that bag of chips. And while this issue is not endemic to Japan, as the United States and the European Union are taking similar steps to “save” their economies, Japan seems to be the country that both are using as a high watermark in this monetary experiment. That’s a lot of water to carry for such a tiny island nation.