Indicator in a Bowl
Apr. 24, 2015
One of Japan’s most popular meals is not only an appealing lunch option - it is a barometer of the local economy. Beef bowl, or gyudon as it’s called in Japan, is a bowl of rice topped with beef and onion simmered in a sweet flavored sauce.
Economists can’t get enough. That’s because the price of gyudon closely tracks the ups and downs of the nation’s fortunes. When Japan sank into deflation two decades ago gyudon chains slashed prices. Now, with the backdrop of Prime Minister Shinzo Abe’s ‘Abenomics’, the dish is becoming more pricey.
For many office workers, lunchtime wouldn’t be the same without a steaming bowl of gyudon. It is a fast, cheap meal, and available almost everywhere. But customers at Sukiya branches were in for a nasty surprise this month when the chain jacked up the price from $2.40 to $3 in a 25 per cent hike. Sukiya is one of three large gyudon operators nationwide.
The other two chains, Yoshinoya and Matsuya, raised their prices last year. Sukiya is playing catch up - and regulars are displeased. “It’s hard on my wallet. I’ll probably come here less,” says one customer. “I may go to a convenience store instead,” says another.
But not everyone is complaining. A satisfied tourist notes “In Spain, a meal is more expensive”. And even in Japan, where budget lunches are the norm, $3 is one of the cheapest options available.
Japan has been long entrenched in deflation. Back in 2001, after the burst of the dot-com bubble and as the economy tanked, gyudon shops responded by slashing prices by 30 per cent to just $2.30.
Gyudon shops weren’t the only ones serving up cheaper meals. In the fight to win customers, restaurants across the country cut prices to the bone. McDonald’s weekday customers could pick up a no-frills burger for just 50 cents.
Penny-pinching diners were happy, but the price wars were poison for the economy. The CPI sank into negative territory. Deflation took hold, and a strengthening yen only made matters worse.
Gyudon operators import most of their meat. In 2011, the yen touched 75 yen to the dollar. Feasting on the beneficial exchange rate, gyudon chains began selling bowls for as little as $2. That same year, Shinzo Abe took power on a promise to revive the economy and bring the nation out of deflation.
The first thing Abe did was to appoint a central bank chief tasked with the job of slaying deflation. BOJ Governor Haruhiko Kuroda launched massive monetary easing in the first arrow of the Abenomics program.
Easy money hit the mark, at least when it came to weakening the currency. The yen went down to 120 to the dollar and gyudon chains were forced to raise prices. At the same time, wholesale meat sellers were hit hard by the surging price of beef.
With 1 kilogram of meat now costing about 20 per cent more than a year ago, wholesaler Shotaro Hanyu says he has had to raise prices to stay in business. He blames the reduced buying power of the yen, and rising demand from the world market. “There are so many Chinese buyers now, we sometimes cannot buy the amount we want. So that leads to higher prices,” he explains.
Consumers in emerging economies are developing a taste for beef and gyudon shops are paying more for their main ingredient. That’s not their only rising cost, as the improving economy means companies are hiring more staff. This is leading to a tighter labor market. Sukiya is raising wages in an effort to get the workers it needs and in Tokyo, it is offering 35% above the minimum wage.
One economist says the price hikes are good news and a sign Japan is finally coming out of deflation. “Firms in different industries are competing to hire the same people. This hasn’t happened for the past twenty years,” notes Seiichiro Samejima of the Ichiyoshi Research Institute. “I think the economy is starting to show an inflationary trend.”
With most analysts expecting Japan’s currency to remain weak for the foreseeable future, beef prices will remain elevated. The labor market is also forecast to remain tight - and both domestic factors point to price hikes.
The price of a simple bowl of gyudon reflects a host of economic factors.