A Stagnant Economy Is Crueler Than You Think — Meet the Young People of Japan's Low-Desire Society

Young Japanese have lived through a stagnation no other developed country's youth has known, and it has reshaped how they think about spending. Their shrunken appetite for consumption may have little to do with being poor; it has become a matter of consumer consciousness.

Away from fashion, away from designer labels, away from buying a car, away from drinking, even away from romance… young Japanese are walking away from everything that looks like "consumerism."

In 2015, the Japanese economic commentator Kenichi Ohmae used his book The Low-Desire Society (《低欲望社会》) to give a name to a country whose young people dislike spending: a "low-desire society." Six years earlier, in 2009, the consultant Hisakazu Matsuda published A Study of the Consumption-Averse Generation (《厌消费世代的研究》), on how the spending habits of young Japanese were changing. The band around its cover carried a deliberately startling line: "Isn't buying a car something only an idiot does?"

In July 2016, Toyota launched a new version of its small sports car, the Toyota 86, in Japan. At the press conference, the Toyota executive Hirohide Saga said: "If young people no longer see owning a car as a dream, this industry cannot go on."

The 86, priced between 2.62 million and 3.25 million yen, was built as an entry-level sports car, "a sports car anyone can afford." Yet 60% of its buyers are over 40. The same holds for Honda's lightweight sports car, the S660, priced at 1.98 million to 2.28 million yen: more than 80% of its buyers come from that age group. In a 2015 survey by the Japan Automobile Manufacturers Association, 59% of young Japanese who do not own a car said they "don't want to buy one."

Since the bubble burst in the 1990s, Japan has lived in a slump where growth has all but stopped. Unease about the future, together with the mounting pressure of a falling birth rate and an aging population, has pushed young people's appetite for spending steadily down.

They have also walked away from golf and skiing, the sports their fathers loved. Golfers fell from 13 million to 7.6 million, and the market shrank from 1.96 trillion yen to 901 billion yen; in 2014, the worst year, 40 courses announced they were closing. The 1987 film Take Me Out to the Snowland (《雪岭之旅》) set off a ski boom — every ski season the expressways to the resorts were jammed, and weekend lift lines ran an hour long — but the temporary winter trains to the slopes are now close to pointless.

The izakaya business has changed too. Salarymen who used to have a couple of drinks after work now nurse one, and the cheap izakaya chains tend to do better. After the consumption tax rose from 5% to 8% in 2014, more Japanese took to drinking at home; a canned beer and a snack from the convenience store cost a good deal less than even a budget izakaya.

Figures published by the Japan Department Stores Association show that the industry's 2016 sales hit a 36-year low, falling below 6 trillion yen for the first time. Profit at Isetan Mitsukoshi, the largest department store group, fell 48.6% that year. Department stores are struggling worldwide, but in Japan the main problem is not e-commerce.

In 2016 Japan's GDP grew just 1.3%, people 65 and older already made up 25% of the population, and young people were spending on a simple principle: save wherever you can.

Go back 50 years, though, and Japan looks like another country.

The most popular advertising line in Japan in 1970 came from Fuji Xerox: "From fierce to beautiful." The scholars Ryuzo Uchida and Munesuke Mita treat that year as the great turning point in Japan's consumer society.

Through the high-growth decades of the 1950s and 1960s, salarymen made the company their home and called themselves "fierce employees" who gave it everything. The black-and-white television, the washing machine and the refrigerator were the dream goods a hard-working Japanese family could reach in the 1950s; the next decade brought a new set of three, the "3C" — color television, cooler (air conditioner) and car. Durable goods that made daily life easier carried the wealth dreams of high-growth Japan.

The 1970 national census put the population at 100 million for the first time. Lifetime employment built a middle class, and "100 million, all middle class" became the way Japanese saw themselves. In the bubble years of the 1980s, they reached the summit of a "high-consumption society."

Uchida and other scholars put the spectacle of even high school girls copying adults by carrying designer bags down to "the urge to show off," but they pointed out that unlike the connoisseur's consumption of a small privileged class at the end of the 19th century, Japan's brand mania was a mass affair. Designer labels such as ISSEY MIYAKE, COMME des GARCONS and Y's were born in a country where everyone was middle class and young consumers had begun to want to look different from one another; department stores like PARCO became "incubators" for young designers.

That market, built by young people who took "consumption is a virtue" as given, thrived for 20 years. Then came the "Lost 20 Years" after the bubble burst.

"Young Japanese went through a lot during the Lost 20 Years," says Yusuke Shimada, a deputy senior researcher in the research department of the Japan Research Institute. As children they lived through the bubble's collapse and the Great Hanshin Earthquake; as young adults they were hit by the 2008 Lehman shock and the 2011 Great East Japan Earthquake. More important, they endured a stagnation no other developed country's youth has known. "That has had an enormous effect on how they think about spending."

Kazukiyo Higuchi, a professor at Hosei University, also told QDaily: "Young people avoiding cars today may have nothing to do with poverty. It has turned into a question of consumer consciousness." Higuchi once headed the Kyushu Bureau of Economy, Trade and Industry, and his books include Consumer Issues in Japan (《日本消费者问题》).

Miyu Shiraishi, born in 1991, graduated from Meiji University this April. Japanese born between 1987 and 1996 are called the "relaxed generation" — the children raised under "pressure-free education."

In her final undergraduate year Shiraishi looked for work for a while, but she did not want to start a job so soon, so she stayed on for a two-year master's at the same university. Japan has no great enthusiasm for graduate school; only two people in her class went. "My parents paid all my tuition. Four years of undergraduate and then two years of a master's at a private university put real financial pressure on them."

Even so, Shiraishi is fortunate: her parents were willing to cover tuition, so she did not graduate several million yen in debt. But she thinks that "if you judge university by what the tuition buys you, it isn't very good value." To ease the load on her parents, she took a part-time job at the front desk of a skating school while in graduate school, earning 50,000 to 60,000 yen a month.

Part-time work is the norm among Japanese students: one report puts the share who work at 72%. They average 12.5 hours a week, and because late-night shifts pay more, 20.7% work between 10 p.m. and 5 a.m.

The Ministry of Internal Affairs and Communications' National Survey of Family Income and Expenditure found that over the 30 years from 1984 to 2014, the average annual consumption index for single men fell from 86.5 to 67.6, and for single women from 96.3 to 87.9. Everything squeezed out of daily spending went into savings.

To get people spending, the Abe government poured in tens of trillions of yen, and the Bank of Japan went as far as negative interest rates to make saving less attractive. Little changed. Among those aged 25 to 34, nearly 30% work on non-regular contracts.

One consequence of unstable income is that young people who want to marry do not dare: they cannot cover a new home and a child's education. Japan's lifetime-unmarried rate rises every year, and now stands at 23.3% for men and 14.06% for women. The Japanese have a phrase for the state of those whose parents have died and who never married: "alone in the world."

With an aged population leaving the pension system on shaky ground, young people save more against risks they cannot name.

Shiraishi now earns 210,000 yen a month, and living with her parents saves her a large rent bill. "I'll keep 20,000 to 30,000 yen as pocket money and plan to save the rest. Though I'm still discussing with my parents whether I should contribute something to the household."

Every trait young Japanese are said to share — no car, no interest in fashion — shows up in her.

"I'm a Tokyo native, and Tokyo's transport is convenient enough. Trains and buses cover everywhere I need to go, so I feel no need for a car," she says. The Japan Automobile Manufacturers Association found that 40% of those who don't buy a car give the same reason: "you can live without one."

The cars owned by Japanese households of two or more people average 8.1 years old. Assume an eight-year replacement cycle, and the Toyota 86 mentioned above works out, in its base trim, to about 330,000 yen a year. Sony Assurance's 2015 National Survey of Car Life put the annual cost of running a car at about 170,000 yen — so owning an 86 really costs some 500,000 yen a year.

The latest figures from the National Tax Agency put the average annual income of Japanese aged 25 to 29 at 3.52 million yen. Feeling no need for a private car, young Japanese are not about to take on a loan for something that eats 14% of their income. It is also worth noting that starting pay for university graduates has barely moved in a decade.

Car sharing, on the other hand, is growing fast: a 15.4 billion yen market in 2014, and forecast to reach 29.5 billion yen by 2020. At Times24, the largest operator, membership costs 1,030 yen a month plus 206 yen for every 15 minutes behind the wheel.

Yohei Harada, who heads the Youth Research Institute at Hakuhodo Brand Design, argues: "Big purchases have been broken up into small ones. (The car-sharing boom) matches the wish to pay just a little when you feel like spending."

In 2000 Uniqlo put out a fleece jacket at around 2,500 yen, half the going price. ZARA and H&M entered Japan the same year; until then, buying clothes for a little over 2,000 yen was unimaginable. In 2015 GU launched the best-selling item in its history, wide-leg trousers at 1,490 yen, and sold 3 million pairs in two months.

The site Mynavi once surveyed male university students: 23% said clothes costing 5,000 yen were already expensive, and their yardstick was Uniqlo — "more expensive than Uniqlo counts as expensive." GU, cheaper still, is now outperforming Uniqlo, and its president, Osamu Yunoki, has set a sales target of 1 trillion yen.

In the bubble years, "one-point luxury" — saving up for a single designer bag — was in fashion. Walk around Japan today and you see a great many young people carrying canvas totes from labels like DEAN&DELUCA and anello.

"Fast-fashion quality is much better than it used to be, and fashion changes by the minute, so I won't spend a lot on expensive clothes. I follow fashion, but I'm not particular about it," Shiraishi says. Buying more items at a lower unit price is exactly what Harada means by "consumption breaking into fragments."

Young Japanese born into a slump in fact grew up with far more goods than their parents had, surrounded from birth by everything merchants devised to sell in a deflating economy. Deflation may sound grim, but Japanese retailers have spent years finding ways to sell cheap goods that are also good.

Cheap eyeglasses, convenience-store private labels, more 100-yen shops every year — they are everywhere in Japanese retail. If the cheap version does the job, why pay more? Young Japanese no longer believe, as their parents did, that "consumption is a virtue." Anything they see as inessential is simply struck off the list; what they want is more for their money.

Professor Higuchi added a caveat for QDaily: "For all the natural disasters and economic crises, Japanese society has been relatively stable overall. So in another sense the lives of young Japanese still look comfortable. And their spending is still driven by feeling, decided on the spot. The young people pouring money into mobile games are one example."

Yano Research Institute has published a Survey of Japan's "Otaku" Market, covering every corner of subculture: anime, manga, figures, idols. Take the idol market alone: in 2015 it grew 30.7% year on year to 155 billion yen, with the average fan spending about 80,000 yen on an idol.

Low-desire young people will happily spend freely on what they love. A survey by the Institute of Regional Distribution Economy makes the same point: asked what they care about most, young Japanese put "hobbies" second, at 20.3%, behind only "work" at 27.8%.

The buzzwords that keep appearing in Japan — "the such-and-such type," "such-and-such girls" — also suggest that phenomena the whole nation shares are getting harder to create, while culture and products pitched at one group, and felt more keenly by it, stand a better chance of catching on there.

In June 2016 Dentsu ran a "Human Research Council" at which companies including Coca-Cola Japan and Shiseido agreed that low-desire young people had become harder to read. Low desire is not the end of all wanting. The way to open the wallet of a young person who avoids spending is to make the usefulness plain, or to give them something interesting enough to pay for.

In 1988 the Japanese energy drink Regain ran the line "Can you fight for 24 hours?" Next to their Showa-born fathers, the "Heisei generation" — those born after 1989 — strikes HR departments as somewhat willful. They do not want to give themselves to a company the way their fathers did, and they dislike work's extension into the evening: the semi-compulsory company drinking party.

One survey found that 55.43% of Japanese office workers aged 50 to 59 would give up private time for their pay, and 78.55% would go drinking after hours. Among young office workers, more than 67.79% chose "private life" over "pay first," and 72.78% would turn down an invitation to drink.

"I hate drinking. If I can, I'd rather not go to those work drinking parties at all. They cost money and waste time. All I feel is pain, and there's no upside at all," Shiraishi says. Private time matters enormously to young Japanese employees now; once the day ends they want to get home and spend the hours on what interests them. The ideal of the "corporate warrior" on call 24 hours is fading.

When Shiraishi applied to her insurance company she went for the "general track" rather than the "sales track," which would have meant calling and visiting clients all day. Her reason: "I didn't want to be too tired." A Cabinet Office survey shows that although their incomes have fallen, Japanese aged 20 to 29 report higher satisfaction than any other age group across areas including leisure.

Ohmae's explanation, in his book, is that a "low-desire society" has stripped young people of the wish to get ahead. The phrasing is overblown, but it is true that since the bubble burst Japan has not produced a single company influential enough to change how people live. Measured against the rest of the world, its rate of new business creation is now about the lowest there is.

Sony, which once changed how young people everywhere listened to music with the Walkman, has been quiet for a long time. Before the Sony Building in Ginza was pulled down, the company held an "It's a Sony" exhibition looking back over its history. On the wall where visitors could write down their thoughts, we found message after message from Japanese remembering the golden age of manufacturing.

Young people in Europe and America face a weak economy and shrinking wealth too. The average personal wealth of American millennials, $29,530, is 52% below what the baby boomers had, and their net worth 56% below; the share of young Americans who own a home fell from 46% in 1989 to 43% in 2013; and in 2017 British parents will lend their children a combined 6.5 billion pounds toward a first home, up 30% from 5 billion pounds in 2016.

Yet Westerners at least still talk about the millennial economy, and China, with a relatively young population, is fighting over consumers born in the 1990s. In Japan, hardly anyone discusses how to sell to the Heisei generation.

The Cabinet Office's Annual Report on the Aging Society projects that by 2050 Japan's population will have dropped below 100 million and people over 65 will make up 38.8% of it — far above the 26.5% expected across developed countries.

The dankai generation, the postwar baby boomers who worked through the bubble, has retired, and more and more companies are fixing on those same retirees and their generous retirement payouts. Even Sony and Panasonic have moved into the "silver economy." Sadanobu Waku, president of Panasonic age free, the group's elder-care subsidiary, once put it plainly: "Run the numbers and getting into elder care now is the only option."

During the high-growth and bubble years, huge numbers of rural Japanese moved to the cities. Now the country has what it calls "concentration in Tokyo": the population piling into the capital. Villages and towns stripped of young workers cannot raise enough tax to keep public services running, and the troubles of a hollowed-out "marginal settlement" — where more than half the residents are over 65 — are graver than those of the low-desire society.

No country in the world has aged as far as Japan. But over a long enough horizon China will face the same thing, and for a good while yet it, too, will be growing more slowly.

The "Lost 20 Years" may simply continue. The low-desire society reaches well past consumption, and further than we imagine.

Cover image from Toyo Keizai

Charts by Feng Xiuxia