Japan: Economics in Everyday Life

8. How Do the Japanese and Americans Spend Their Money?

8 How Do the Japanese and Americans Spend Their Money? James Mak Japanese and American households use their incomes very differently in terms of amounts of savings and ways to spend money. First, Japanese households save a larger percentage of their after-tax incomes than American households do—14.7 percent versus 4.2 percent, respectively (see chapter 16). Americans might find those numbers hard to believe if they’ve ever seen Japanese tourists in the United States buying up Gucci bags, Calvin Klein jeans, and everything in sight with famous, and usually European, brand names (see chapter 6). These tourists also shop in stores most Americans would feel too intimidated even to walk into. As for the income that they spend, American and Japanese households differ in several important categories. To make it easier to compare the two households, let’s first look at the numbers in the table on page 52. These numbers show that the Japanese tend to allocate a much larger share of their budget on food and housing than Americans do, while Americans spend disproportionately more than the Japanese on medical care, transportation, and unspecified “other” expenditures. 51 Why do the Japanese spend more of their budget than Americans on food and housing? The answer is simply that food and housing are much more expensive in Japan than in the United States. High Food Prices In a land-scarce country like Japan, food is expensive to produce . But it is difficult to imagine that scarcity of land explains why a twenty-two-pound bag of rice at the Daiei discount store in Kobe, Japan, recently sold for 53 U.S. dollars (at an exchange rate of 100 yen to the U.S. dollar), or more than 7 times the price of California medium-grain rice sold at the Daiei store in Honolulu. If land scarcity were the only reason for high food prices, Japan could lower its domestic food prices simply by importing cheap food from land-abundant countries like the United States, Canada, and Australia. Food prices are high in Japan largely because of Japanese government agricultural policy and regulations. In the past, Japan’s powerful agricultural lobby effectively blocked the massive importation of cheap food into the country, and the result has been very expensive food. For instance, rice for consumption as a staple could not be imported into Japan without government permission (see chapter 20). And permission was not granted (period!) except under extraordinary conditions, as in the case 52 Japan: Why It Works, Why It Doesn’t United Category of Spending States Japan Food, beverage, and tobacco 10.8% 19.7% Clothing and shoes 5.8 5.7 Housing 19.0 26.4 Medical care and health expenses 17.5 11.1 Transportation and communications 13.2 9.6 Education, cultural services, and entertainment 10.5 10.6 Other 23.2 16.1 of a very poor rice harvest in 1994. Indeed, a few years ago, the Japanese government would not allow California rice growers even to give out free samples at an international fair in Japan. One reason for the strength of the agricultural lobby in Japan is that election districts were not redrawn until recently despite massive migration of the population from rural to urban areas after World War II. As a result, rural voters came to have far more political power (per capita) than urban voters. Prospects for lower food prices in the future are improving. Political pressure from the United States and Japan’s other trading partners has begun to open up Japan’s markets for agricultural imports. Under the recently completed Uruguay Round of General Agreement on Tariffs and Trade (GATT) discussions , Japan has finally agreed to import small amounts of How Do the Japanese and Americans Spend Their Money? 53 Bon appetit Japan is increasingly dependent on food imports. Here is the percentage of total food consumed in Japan, measured in calorie units, that is produced domestically. Sources: Asahi Shimbun, Japan Almanac, 1997 and Nikkei Weekly, April 14, 1997. Fiscal Year % Food Self-Sufficiency 0 10 20 30 40 50 60 70 80 1995 1990 1980 1970 1960 rice annually beginning in 1995 (see chapter 20). In the past, liberalization of food imports, such as beef and oranges, has brought down prices in Japan. High Cost of Housing Housing, another basic necessity, is also much more expensive in Japan than in the United...