For the past 30 years, I’ve seen Japan as a (perhaps even “the”) leader in a generalized global transition from economies driven and measured primarily by quantitative values and standards to economies driven and measured at least as much or more based on qualitative values and standards.
As Japan transitions to an economy in which we have fewer resources as well as fewer potential customers and employees, our path to prosperity is making better use of the resources we have and creating more valuable experiences for the people who buy from and work for us.
This, of course, raising the question of how we assign value. The economy operates based on financial measures, so of course, one of the ways to evaluate value is financial performance. In this respect, Japan has an interesting record. Since the collapse of the bubble, Japan has seen very little growth in GDP and the stock markets have gone through a series of hills and valleys. The real estate market has been even less attractive. With the exception of a few urban areas, the price of land in Japan has collapsed and remained low since the mid-1990s collapse of the bubble. The lack of growth in standard economic measures is often interpreted to indicate that the Japanese economy is at the very least stagnant and perhaps even a zombie.
The next question, though, is whether the lack of growth has led to a reduced quality of life in Japan. This is a much harder question, but one of the defects of this economy from the perspective of investors has in many ways been a blessing for consumers. After 30 years of deflation, many categories of living expenses are relatively cheap compared to much of the industrialized world. In simple terms, while you can, of course, find plenty of expensive dining options, you can also get a very satisfactory, relatively healthy meal in Japan for under 1000 yen per person. If you are a light eater, you can actually easily find a decent bento for less than 500 yen.
Both long and short-term accommodation have followed a similar curve. Tokyo is a world-class city and therefore commands world-class prices for both long-term and short-term accommodation. In contrast, outside the Kanto area, both hotels and long-term housing like houses and apartments can actually be quite reasonable compared to our industrialized peers. On the plus side, standards of cleanliness and convenience are world-class. On the minus side, this is still a space-constrained country, so you while the price for a unit of housing is not necessarily high, the availability of spacious housing is limited.
So this brings us back to the question of how we evaluate quality. How do you evaluate the quality generated by an economy? One standard might be variety. When it comes to food, in most reasonably urban areas, you can find a wide variety of cuisines. Though culinary standards are subjective, many people say that Japan is the second best place in the world to get Italian and French cuisine. A number of years ago, I read that Tokyo had more restaurants with Michelin stars than any other city in the world. Moreover, as noted above, many of these restaurants are very reasonably priced compared to peer cities in other countries, especially when you convert the prices into dollar terms. The same holds true for many other categories of life.
The whole world seems to be heading in this direction (eventually), so the way we deal with this transition from quantity to quality in Japan may provide the examples the rest of the world follows as each country moves through a similar period of transition.
And as a final note, I’m not arguing here that there is no quantity emphasis in Japan. There obviously is. I’m just curious whether Japan might be on the leading edge of a global shift in which more and more people realize that while they don’t need more, they might indeed want “better”…
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I wrote this draft about 3 years ago but never got around to deciding if I wanted to post it. Now, three years later, prices are going up, the stock market is hot, the yen is weak, and people are complaining about inflation in Japan too. If anything, though, I suspect these forces will make people will continue to focus more on the qualitative aspects of life than the pursuit of more.
© Dana Cogan, 2023 and 2026, all rights reserved.