In the final installment of the series (Parts One, Two, Three, Four), we look at the export possibilities for Japanese culture when the “most popular” goods and works are increasingly being made by and for marginal subcultures without obvious analogs overseas.

Part Five: The Difficulty of Exporting Marginal Subcultures

Marketing guru Kawaguchi Morinosuke’s recent book Geeky Girly Innovation: A Japanese Subculturist’s Guide to Technology and Design posits that corporate Japan needs to take more guidance from otaku and gyaru. There is an important point to this — these are now the most influential and powerful groups in Japanese pop culture and should not be ignored out of snobbery. And maybe their obsessive spirit has applicable lessons for industry management. Yet we should not be naive about this either in a wider context: the products actually made within these subcultures are increasingly losing their resonance overseas.

Until now, you could divide Japan’s successful consumer exports into three groups:

(1) technological/industrial goods like cars and electronics
(2) kids’ products like video games, toys, comic books, and pens/stationary
(3) sophisticated cultural goods like fashion brands, indie music, and literature.

Other than automobiles, Japan has lost its edge on high-tech goods. Korean rival Samsung has almost singlehandedly taken over the space once monopolized by Sony, Toshiba, Panasonic, and Sharp. And with the decreasing number of children, greater competition from the U.S. on video games, and a general move away from gadget culture, Japan is also struggling to export kids’ products. Meanwhile most of Japan’s successful cutting-edge culture exports — Pizzicato Five, Cornelius, Yellow Magic Orchestra, Shonen Knife, The Boredoms A Bathing Ape, Comme des Garçons, Hiromix, Murakami Takashi — came from a scene that has ceased to be high-profile in Japan.

This last category, while minor in terms of actual sales, did a lot of the legwork for boosting the Japan “brand” in the 1990s, especially among the cultural elite in the U.S. and Europe. The reason is simple: the artistic works spoke the language of upper middle-class aesthetes overseas. Furthermore these artists made an easy match with the West because they played with iterations of ideas originally created in The West: avant-garde art and fashion, street culture as defined by US/UK, punk rock, lounge music, etc. In general, the successful products and artistic works had something “universal” (i.e., “Western”) at their core, which made them more easily exportable. Overall Japanese culture found warm reception where the consuming groups in the West were similar to the Japanese creators in class position and values. We take for granted that Miyamoto Shigeru’s art-school tastes appealed subconsciously to the richer American youth who bought up the NES in droves during the mid-1980s.

What we have not seen, however, are good consumer comparisons overseas to the psychologically tortured Japanese subcultures like contemporary otaku or the yankii/gyaru. Mass market anime like Naruto and Gundam are relatively easy to export as they were built for “normal” youth. That cannot be said about moe titles that are meant to satisfy older men obsessed with two-dimensional elementary school girls. Similarly, no gyaru clothing brand has more retail stores overseas than the avant-garde Comme des Garçons, despite gyaru clothing’s huge business in Japan and CDG’s highly-limited audience. At least from what we have seen from the big subcultural moments in the last decade, the culture of Japan’s marginal pluralities is almost unexportable.

Let’s look again at AKB48 on YouTube — a global site where anyone can watch videos from anywhere else around the world. Based on the public viewership data for “Heavy Rotation” and other AKB48 videos, the vast majority of views for AKB48 come from the group’s domestic fan base. In other words, no other country than Japan contributes to AKB48’s multi-million view count despite the fact that the videos are available worldwide and AKB48 is the overwhelmingly dominant group in Japanese pop at the moment. AKB48’s seemingly-massive popularity in Japan make them the number one favorite for J-Pop exportation. Yet no one non-Japanese is watching their videos — even in light of a “Japan Cool” wave and the popularity of YouTube all around the world. Compare AKB48’s videos to the insight map for “The Boys” by Girls Generation (SNSD) in Korea, who have had massive success in Japan and whose YouTube stats show a very wide global audience.

In most countries with growing economies, educated upper-middle class consumers still spearhead the consumer market. They have the most disposable income and the most interest in cultural exchange. And those consumers, whether it’s Taiwan or the U.K., are the ones most likely to be willing to follow and purchase foreign cultural items.

Currently, however, the most conspicuous Japanese culture of otaku and yankii represents value sets with little connection to affluent consumers elsewhere. Most men around the world are not wracked by such deep status insecurity that they want to live in a world where chesty two-dimensional 12 year-old girls grovel at their feet and call them big brother. The average university student in Paris is likely to read Murakami Haruki and may listen to a Japanese DJ but not wear silky long cocktail dresses or fake eyelashes from a brand created by a 23 year-old former divorcee hostess with two kids. Overseas consumers remain affluent, educated, and open to Japanese culture, but Japan’s pop culture complex — by increasingly catering to marginal groups (or ignoring global tastes, which is another problem altogether) — is less likely to create products relevant for them.

This is not to say that the emergence of otaku and yankii culture is insignificant for Japan. This wave has finally given material and cultural expression to pockets of society that had a hard time voicing their experience in the past. The rich Tokyo elite enjoyed a disproportionately high influence over national culture for decades, and now the two marginal groups have taken the elite’s place in dominating the direction of pop. When it comes to “fairness” and democracy, this is the least elitist that Japanese culture has ever been. But we have replaced one kind of distortion with another, and we still should not confuse these subcultures’ tastes with being truly “mainstream.”

One of Harvard Business School professor Michael Porter’s teachings is that companies that are competitive overseas come from domestic markets where they have local competition and must learn to please demanding local consumers. The more advanced the consumers, the more advantage a company has in eventually exporting its products when other consumers catch up. Apple’s success with the iPod came from the product’s direct targeting of tech-savvy American college students and former college students who had massive libraries of mp3s stuck on computers and wanted to take them out on the streets. Girls Generation worked to best other idol groups in Korea through highly skilled dancing, singing, and a song library purchased from European producers.

Japan’s consumer market meanwhile is becoming increasingly dominated by technological and cultural laggards. The peak “Japan Cool” came at a time in the 1990s when the average Japanese was intentionally or inadvertently consuming highly sophisticated culture, and the pressures to please them gave Japanese companies the training to be globally competitive. Cultural producers tried to one-up each other in coolness.

Japanese companies now face a true crisis: Appealing to the most powerful consumers in Japan will lead them away from tastes and values that can be easily exported overseas. AKB48 may be opening vanity branches in Taiwan and Jakarta, but will the world inherently be interested in an idol group meant to please a small group of men’s reactionary attitudes towards women and desire for songs that ignore the last twenty years of musical change? And as we’ve seen with the success of K-Pop in Japan, companies cannot automatically protect the domestic market against invasion. When the mainstream consumers do see something they like, that reflects their values in a way that otaku and gyaru content does not, they pounce. But until they reawaken as a consistent consumer force or rebuild cultural online to be less centered around product purchase, we are likely to stay within the current situation — where marginal subcultures rule the school.

Last time we saw that the tastes of upper and middle-class “mainstream” consumers dominated Japanese pop culture from the post-war to the end of the 1990s. This time we will explore the most important cultural change of the last decade: the greater proportional power for marginal subcultures. Mainstream consumers, for the economic and demographic reasons given in Part One and Part Two, have ceased to consume with the same force as before and thus have lost their “voting power” within pop culture.

Part Four: The Rise of Marginal Subcultures

The drop in cultural markets has been almost perfectly pegged to the decline in incomes. Middle class consumers are buying less, and when they buy, now go for cheaper or risk-free products. Within this environment, we could expect marginal subcultures to also have curbed consumption. Yet they did not! And their steady buying into their own cultural niches has made huge changes in the tenor of Japanese pop culture.

Yankii and otaku: Consumption as pathology

The yankii and otaku have never traditionally been blessed with high incomes nor high future earning potential, and in pure homo economicus terms, should be cutting back even more than middle-class consumers. We must understand, however, that for the otaku, yankii, and gyaru, shopping is not merely a form of leisure nor has it even been an attempt to buy into a larger society-wide consumerist message. These groups use consumerism as a therapeutic solution to their psychological and social problems.

The otaku spend their time as avaricious collectors of goods and trading information with other otaku. In shunning away from mainstream standards of sociability, sexuality, and career success, the act of maniacal consumption becomes their raison d’être. They cannot relate with other people if not commenting upon these cultural goods. Culture — most of which must be purchased and enjoyed as object (even when it is just physical media holding content) — is the great satisfier of their deepest desires.

The gyaru, in comparison, put a high premium on social networks and romance. Yet there is a certain pain at the heart of gyaru culture. In his book Keitai Shosetsu-teki (“Cell Phone Novel-esque”), author Hayamizu Kenrou calls the basic aesthetic mode of gyaru literature — cell phone novels, Hamasaki Ayumi lyrics — “trauma-kei” due to its emphasis on overcoming personal tragedy. When I interviewed Nakajo Hisako, the editor-in-chief of Koakuma Ageha, in 2009 I asked, “Why do gyaru spend so much time on their clothing, hair, and makeup?” She answered, “Because we are not cute. If we were cute, we would just wear a white T-shirt. We have to work hard to look good.” There is an obvious logic to this: The gyaru’s transformation into golden curly hair and heavily painted faces is an escape from their normal selves.

Like Nakajo suggests, gyaru culture looks as it does precisely because they are not “blessed” girls (Nakajo’s words). And this means gyaru must spend on clothing, hair treatments, and makeup in order to achieve the desired self-image. Beyond this desire to look like someone else (and basically like everyone else in their peer group), there is also the social demand to show allegiance to a wider gyaru subculture by donning its uniform. To be a gyaru means dressing like a gyaru — no exceptions.

Marginal groups’ up their voting power in the consumer vacuum

The end result is that the otaku and yankii have an almost inelastic demand for their favorite goods. They must consume, no matter the economic or personal financial situation. They may move to cheaper goods, but they will always be buying something. Otherwise they lose their identity. While normal consumers curb consumption in the light of falling wages, the marginal otaku and yankii keep buying. And that means the markets built around these subcultures are relatively stable in size.

So as the total market shrinks, the marginal groups — in their stability — are no longer minor segments but now form a respectable plurality in the market. In other words, if otaku or yankii all throw their support through a specific cultural item, that item will end up being the most supported within the wider market.

The clearest example of this is AKB48. With the letters AKB in their name, this group of girls was unequivocally marketed towards older males based in the Akihabara otaku culture. Compared to past mass market groups such as Speed, the girls are intentionally chosen and styled to look like elementary schoolgirls and lyrically address older men with direct sexual references. (See the “cat-eared brothel” video for “Heavy Rotation” and the unambiguous “love knows no age” lyrics for “Seifuku ga jama wo suru.”)

The mass idol group regularly has an “election” (sousenkyo) where fans try to vote their favorite girl to Number One. Buying certain AKB48 CD singles gives the fan a vote in the AKB48 election, which thus incentivizes otaku to buy multiple copies of the CD to increase their “political” power. The CD is thus no longer a means of listening to music but a way to influence the future of AKB48. This has created a legion of fans who buy dozens and hundreds of the same AKB48 CD or even 5500 copies. There are now doubts about that story’s authenticity but it basically was an exaggeration of an existing principle. Regardless, the marketing strategy of AKB48 does encourage the purchase of multiple goods, thus amplifying the buying power of nerds beyond their small numbers. This means as a consumer bloc, the AKB48 otaku fans can rival the non-otaku consumer base.

This otaku bloc strength, as well as other niche’s dedicated buying, can be seen through the music charts. In 2010 only three artists made the Oricon best-selling singles market — AKB48 and a Johnny’s Jimusho group Arashi. (At this stage, you can almost argue that music fans of Johnny’s groups are themselves a conspicuous cult rather than a mass market phenomenon.) Only two artists taking the entire singles market is unprecedented in Japanese musical history. In the previous decade, the average number of artists in the top ten was 8.2. The best explanation is that mainstream consumers stopped buying music, even single song downloads, so the favorite acts of marginal subcultures now appear to be the most popular.

Otaku and gyaru: winners by default

This principle demonstrates how AKB48 became an unlikely “mainstream” phenomenon. Despite AKB48 being so clearly marketed towards a niche audience, their success in a declining market has made them perceived to be the most popular in the entire market. Therefore 2010 and 2011 saw AKB48, with backing from advertising monolith Dentsu, doing advertisements for mainstream brands and chains such as 7/11. (Lawson’s has now countered with a nerd-drooling K-On! campaign.) With no major competition from more mainstream-oriented idols and groups, they became the obvious spokespeople and magazine cover girls — thus amplifying their fame more.

In the case of gyaru, there are larger numbers of gyaru than otaku, meaning that the gyaru can just consume their standard number of items and still dominate the market. Before I mentioned that the extremely “normal girl” fashion magazine non•no once sold close to a million copies per issue in 1996 at the peak of the publishing market, which was once far above the 310,000 copies for hardcore yankii/gyaru magazine Popteen at the same time. Around 2009, however, non•no dropped to a mere 180,000 copies a month while Popteen was still hovering around 310,000. Gyaru are still consuming fashion, and therefore need fashion guides to tell them how to do so. “Normal” girls have generally lost interest in clothing and do not need fashion guides as much. So in this collapse of the mass market, a magazine representing a marginal taste has become one of the best-selling.

With the yankii and otaku culture being so proportionally conspicuous in the market and mainstream and avant-garde styles being so minor and invisible, the once marginal looks have a greater legitimacy for less engaged consumers who mostly just desire socially-acceptable styles. As a result, gyaru and yankii fashion have had a strong moment over the last five years, leading to large-scale booms in things once unfathomable such as “hostess fashion.” University students at elite schools like Keio are likely to have hairstyles reminiscent of yankii hosts. Films and books with obvious yankii narratives, such as Rookies and cell phone novel Koizora, became huge national hits in 2009. Gyaru singer Nishino Kana is one of the few well-selling artists on Sony (formerly known for alternative musicians Supercar, Puffy, and Denki Groove). And even former “arty” magazines like CUTiE have moved towards the gyaru style, and the fiercely indie girl mag Zipper put gyaru icon Tsubasa Masuwaka on the cover. There is no popular female style that does not see a little influence from the yankii side of gyaru culture.

Not truly “the most popular”

While otaku and yankii cultures are enjoying a new cultural influence in their deep commitment to consumption, we should not forget that these groups do not make up any kind of actual societal consensus. The masses may be consuming parts of their culture, but these groups are at best pluralities rather than majorities — dominant in the market but nowhere near 50% of tastes.

For example, if you look at the sales numbers for the #1 single of 2010 — “Beginner” by AKB48 at 954,283 copies — this would not have been enough copies to make the top ten from the years 1991 to 2000, when the wider public bought CDs in droves. In 2001, it would have ranked in at #10 — a successful hit for a niche, but not the symbol of J-Pop for the era. The population of Japan in the last ten years has not dropped enough to make this smaller number of sales proportionally relevant — just less people are purchasing music.

AKB48’s narrow popularity becomes very clear when the group appears on television — a medium that continues to have a mass audience (although disproportionally elderly viewers.) Maeda Atsuko had been repeatedly voted the #1 member of AKB48, and yet her recent drama Hanazakari no Kimitachi e (Ikemen Paradise)saw extremely low ratings (episodes around 6%). AKB48 variety show “Naruhodo High School” has drawna dismal 4.5%.

AKB48 have also been extremely popular on YouTube, which skews towards a tech-savvy male audience in Japan. And yet a song like “Heavy Rotation”— at over 50 million views — has nearly one-third “thumbs down” votes. This is an extremely high amount level of dislikes compared to other music videos on the site.

So AKB48 are the most conspicuous music group in Japan at the moment with the highest record sales and highest number of appearances, but they should necessarily be considered a “mass” phenomenon with widespread fans across multiple segments. The group has captured the strongest plurality in the market, and companies have mobilized around them in desperation. If Dentsu could sponsor a different hit idol group with an even broader fan base, they would. But ironically, no one other than AKB48 or Johnny’s Jimusho groups have the sales or market legitimacy to work in the context of mass market advertising. Marginal groups are now feeding and over-influencing the remnants of the mass market just as counter-consumer once did.

Next time, we look at whether marginal subcultures can produce goods that are easily exportable.

In Part One and Part Two, we looked at how decreasing incomes, a declining birth rate, increased spending on phone bills, and the lack of cultural relevancy for the Internet have all led to shrinking markets for cultural goods like fashion, music, books, magazines, manga, and TV. In this installment, we examine how these changes affect the makeup of consumers within the cultural markets — a shift from mainstream consumers to mostly marginal subcultures.

Part Three: Mainstream Consumers vs. Marginal Subcultures

The collapse of spending on popular culture in Japan makes the country an important laboratory for understanding how a “cultural ecosystem” of consumers, producers, distributors, media, trend-spotters, and advertisers operates when market activity decreases. In this context, we must first look at the degree to which middle class consumers made up and then retreated from markets for cultural goods.

The rise of middle class consumers

After World War II, Japan’s entire economy was in shambles and spending focused exclusively on the basics for survival. By the late 1950s and through the late 1960s, however, a buoyant consumer culture emerged for upper middle class salaryman and business owning families. In the mid-1970s, the Japanese economy had undergone its “miracle” and now a broader Japanese middle class finally had enough income for discretionary spending on culture. As Japan entered the 1980s, most everyone in the country was consuming products related to music, fashion, and manga to an active degree — especially normal middle-class teenagers with “standard” Japanese tastes and conventional life paths.

Cultural producers and advertisers needed to target social segments with the largest possible size and the highest amount of discretionary income. At first this meant Tokyo’s upper and upper middle-class, and for obvious reasons, these groups had pioneered consumer culture in the immediate post-war. Even in the 1970s and 1980s, the affluent still had disproportionate buying power, so the first fully consumer magazines for young people like JJ and Popeye built those lifestyle expectations into their message. Middle middle class consumers likely read those magazines at first as aspirational, but theygrew rich enough in the bubble era to become the most dominant and lucrative segment of the market. As a result, manufacturers went for both the giant middle class mass, and the resulting mainstream culture ended up reflecting the values — or what were perceived to be the values — of standard middle-class consumers.

The market responds to the tastes of those actively buying goods, so consumer culture can feel akin to a political election. Consumers “vote” for their favorite products/creation through the act of purchase. Producers in turn continue the creation of popular items, stop making unpopular ones, and make new products based on the templates of previous hits. Unpopular manufacturers and producers disappear or adapt to winning formulas.

Thus at the height of the cultural market in Japan, normal, middle-class consumers had the most “voting power.” Whatever they liked, the market took most seriously. In the peak of the publishing industry in 1996, for example, issues of a mainstream “good girl” fashion magazine like non•no sold nearly a million copies — vastly more than any niche title like Popteen. Big apparel companies then made brands that fit within the non•no style. At the same time, styles and items with mass consumption like those seen in non•no or JJ enjoyed social legitimacy. In other words, whatever everyone was buying was the “right” thing to buy. Hence non•no had greater influence over the social norms of fashion than smaller titles thanks to huge sales and an industry structure built around it. This principle carried across most major cultural fields: mainstream consumers outnumbered niche consumers, and the markets overwhelmingly created products for mainstream tastes.

The rise and fall of “counter-consumers”

While mainstream culture mostly spoke to mass consumers, the 1990s saw disproportionate dominance on Japanese culture from a group of sophisticated, educated Tokyo-based consumers, who are best described as “counter-consumers.”

Japan had a strong political and artistic counter-culture in the 1960s, but as it shed its political aspects after 1972, this “underground” community gradually shifted their attention on creating physical goods sold to small niche audiences built upon tastes in opposition to the mainstream. For example, Kawakubo Rei aimed to push fashion into avant-garde directions through her line Comme des Garçons, which before its Paris debut had only a fractional audience in Japan. The members of this millieu then mostly participated and supported their community through the act of consumption — rather than politics or true Bohemian drop out culture. They were “counter-consumerists” — demonstrating personal allegiance to a deep niche through buying goods counter to mass culture.

They had likely expected their world to stay small, but as Japanese economy started its exceptional rise in the 1980s, the number of media and shopping buildings increased, and the well-informed types who curated content for these institutions moved to introduce more and more leading-edge culture to their increasingly sophisticated consumers. The PARCO Theatre in Shibuya, for example, opened with a performance from avant-garde dramatist Terayama Shuji. The end result was a twenty year “culture bubble” where Japan’s college and art-school students made up a powerful consumer bloc, supporting cutting-edge creators within Japan and buying products from all over the world with similar values. In this era, art magazines like Studio Voice sold over 100,000 copies, and unreadable post-modern works like Asada Akira’s Structure and Power became best-sellers.

This small group of Tokyo elite continued to stake out a huge claim on Japanese culture in the mid-1990s through magazines like Olive and relax. The street fashion style Ura-Harajuku — led by Fujiwara Hiroshi, who had started out in the underground London Nite scene — became the most popular look for men around 1997, and like Shibuya-kei musical artists like Pizzicato Five and Cornelius had certified chart hits. Members of this taste culture saw their values reflected in Tsutsumi Seiji’s Saison Group retail chains Parco, Muji, Wave, and Loft. Furthermore the small counter-consumerist minority ended up working themselves in the increasingly lucrative cultural industries, thus propagating this set of tastes and values to a new generation.

At the turn of the century, however, the counter-consumerist wave started crashing. As fewer and fewer middle-class consumers bought goods, they stopped experimenting on “weirder” products. Cultural producers could thus no longer justify making goods that worked as branding projects but had no financial return. Furthermore the new millennial youth generation could not understand the values of either the superficial Bubble kids or the cultural elite obsessed with Western art, music, and fashion. Magazines like Studio Voice and relax folded, while famed Shibuya record stores Maximum Joy and Zest closed their doors. Even HMV — the birthplace of Shibuya-kei as a mass-market genre — disappeared and was replaced with a Forever 21. Avant-garde brands returned to having tiny audiences. Comme des Garçons started up myriad new low-priced, logo-based lines that would appeal to younger and less daring customers.

The culture bubble had popped, and counter-consumerists went back underground.

Marginal subcultures on the fringes

From the 1960s to the end of the 1990s, the upper-middle class and middle-class controlled Japanese pop culture, yet there had always been a few important marginal youth consumer groups outside of the Japanese mainstream. The most solid subcultural voting blocs since the late 1970s have been the otaku — anti-social “nerds” interested in science fiction, comic books, video games, and sexualized little girls (lolicon) — and the yankii — “delinquent” non-urban working class youth with low levels of education and a blue-collar destiny. (The gyaru subculture — originally upper middle-class — should now be seen as the female manifestation of yankii values.)

These marginal groups are true minorities when compared to the mainstream market, but their size is not what makes them marginal. The use of “marginal” here measures the distance from the subcultural consumer segment to both middle-class social norms as well as from the tastemakers, gatekeepers, and workers within the large companies that produce pop culture. The counter-consumers, for example, were never large in number, but they had their hands on the reigns of the culture industry. Otaku may likely work at independent game publishers who make erotic titles, and ex-yankii run yankii magazines, but Japan’s largest and most hallowed culture companies such as Magazine House, Nintendo, Sony, and Uniqlo mostly hire graduates from Waseda, Keio, and other top universities. Otaku and yankii had strong outcast communities, but they essentially had to live on the fringes of pop culture. Yankii and otaku spent their formative years as true social outcasts — blamed as juvenile delinquents and sociopaths.

In times of a substantial and profitable mainstream consumer market, large companies were justified in ignoring the yankii and otaku segments as potential customers. Moreover the culture industry had a great risk in indulging too conspicuously in these subcultures, lest they offend their core of middle-class consumers. Fashion magazine non•no could not have shown a yankii or ganguro girl as a style icon — the editors’ curated style is not just different from the yankii style but fully premised on being a style that is not yankii. Accordingly the major consumer magazine publishers — Magazine House, Takarajima, Shueisha, and Kodansha — never made titles directly appealing to yankii youth. This was left to smaller fringe publishers like Kasakura and Million. Large advertisers — magazines’ true consumers — also demanded that media material be in “good taste” for the very same reasons. They wanted to connect with aspirational upper middle-class culture rather than despised outcast culture.

So until very recently, Japan’s culture industry — dominated by educated upper-middle class counter-consumers — worked hard to appeal to Japan’s large middle class. Tokyo’s powerful consumer base and Tokyo as industry center of cultural production made the wider culture gravitate towards the specific tastes of Tokyo upper middle-class youth. This, however, has drastically changed in the last decade with the fall of middle class consumerism. Next time we will look how the otaku and yankii have taken over the vacuum left by the middle-classes as they exit markets.

Last time we looked at the decline in Japanese wages, increased demand for inferior goods, and decreased demand for luxury brands. This time we look at the effects of lower incomes on markets for explicitly cultural goods.

Part Two: The Implosion of Cultural Markets

Within Japan almost every single market for cultural goods has seen prolonged decreases in sales since the late 1990s or has headed into troubled waters.

• Music: The music market exploded in the 1990s thanks to karaoke, mini-CDs, TV tie-ups, and female-oriented J-Pop but that growth has been completely wiped out and now sales returning to late 1980s levels, even with increased digital downloads.
• Publishing: Revenues in the book and publishing industry decline yearly, and the manga and anime industries are in crisis. Manga magazine sales are collapsing, and even relatively stable single-title comic collections have started to drop. Consumer magazines are going under faster than new titles can be created; just in recent years, we’ve said goodbye to Esquire, Pinky, Studio Voice, and PS. Discount chain Book Off is increasingly unable to sell its cheap used books, CDs, and games. And of course, the Internet has also ravaged porn magazine sales, which kept many publishers in Japan able to support its other non-porn magazines.
• TV: TV viewership is down — with the main broadcast channels routinely getting less than 10% shares weekday prime time — despite no serious competition from cable or satellite TV. 13.5% of young men say they watch no TV. TV sales were down 73% in October 2011, and 75% of 3D TV owners were “disatified” with the technology.
• Clothing: Clothing sales have declined 30% since their peak in 1991, with the men’s suit market essentially halving in size since 1997. Sales are also shifting away from premium goods and onto fast fashion and low priced brands like Forever 21, Uniqlo, and Shimamura. Meanwhile “select shops” — once the main site of sales for small boutique import brands — have shifted their inventory to their own cheaper Chinese-made lines.
• Gaming: Games sales did very well over the last decade, but the once-dominant Japanese game industry has been faltering on the global stage, and even stalwart Nintendo — who hugely expanded the audience for gaming through the Wii and DS — is beginning to see major declines. Sony now makes most of its income from its insurance business rather than its consumer electronics or gaming. Meanwhile working class hobby pachinko is also bleeding money.
• Cars: Although automobiles are not strictly cultural goods, there has been a great decline in Japanese auto sales and part of that stems from young consumers no longer buying cars as part of a “driving” hobby.

One exception is films: 2010 was a banner year for motion pictures at ¥220 billion in ticket sales. The film market, however, is increasingly aggregating around mega-hits rather than supporting a wide diversity of titles. Some key art-house theaters, like Ebisu Garden Cinema, closed after 17 years.

Why the decline?

There are a variety of factors to blame for the declines in these markets. As suggested in Part One, lower salaries have decreased consumers’ discretionary income with which they buy cultural goods. Young workers in particular are having trouble finding work, and when they do, have very low salaries and no clear track for salary increases. Uncertainty about future earnings also means a higher saving rate, which further decreases discretionary spending in the present. Among the marketing community, Japanese millennials are known as the “generation who doesn’t consume.”

Demographics have also played a big part in hurting the cultural industries: An anemic birthrate has evaporated the youth consumer base. In 1964 — at the height of the “baby boom” — 18.6% of the top population was between 15 and 23 (18.03 million). During the Bubble Era, the Dankai Jr. generation made up a relatively high 14.1% of the population (17.47 million). Although statistics are not immediately available for the last nine years, we can assume that the number of youth is already lower than the meager 11.1% of 2000 (14.13 million) — which was already the lowest recorded since 1920. (Statistics from here.) This means that 3-4 million consumers have disappeared from the zone that in the past has been responsible for most cultural expenditure. Smart companies are thus shifting their product lines to appeal to the larger demographic swaths of older, richer consumers.

Moreover young people are increasingly entertaining themselves with free to low-priced content on mobile phones and the web, and to a certain extent (although less than the West), much material is available online in pirated form. Spending has also shifted towards paying off phone bills rather than being spent on CDs and clothing directly like in the past. Phone companies are capturing much more of consumers’ money and then distributing it to content providers themselves.

Isn’t the Internet making up for all of this cultural decline?

Of course, most countries have also seen an implosion of “analog” content in the face of a digitizing world, and Japan is no exception to this trend. Despite high Internet penetration, however, web culture has yet to establish itself as a legitimate pillar of content in Japan. Most offline cultural producers, like newspapers and weekly magazines, do not put a significant amount of material online. There are no start-up sites with the influence of Boing Boing, or the political importance of Huffington Post, Talking Points Memo, and the Drudge Report. There have been few D.I.Y. bloggers who rival offline cultural influencers; no 14 year-old bloggers invited to haute couture fashion shows in the vein of Tavi Gevinson. In fact, the Internet in Japan still retains a “techy” or “nerd” image, and an impenetrable otaku site like 2ch is still the central heart of Internet meme creation.

Magazines in Japan usually directed consumers towards the “proper” goods to buy and how to use them, and there have been almost no websites — at least for traditional mainstream genres like fashion — that have taken over this role from print. Magazines get the latest information and bestow a legitimacy upon their advice. An anonymous kid with a blog just doesn’t have the same effect over the market.

There have been cultural and structural barriers towards moving offline content online and creating new web content businesses (see “The Fear… of the Internet”), and the overall result is that the Internet in Japan is not picking up the slack of the traditional culture markets as they shrink. Most importantly web use in Japan is relatively passive and anonymous, and this only further questions the culture created upon it.

This means that cultural institutions still have to look at analog markets — like the number of CDs or magazines sold — as a way to gauge success and popularity. Our best understanding of a “hit song” in Japan remains a “number one” on the Oricon charts. A “hit” TV show pulls numbers that were once understood to be a “failure.”

The total effect is that as Japan’s economy declines, Japanese popular culture is not just dropping in terms of sales but also in terms of total participation as well as “visible” participation. Consumers were once engaged with pop culture most actively through the act of consumption — buying a CD, book, or video game — but not only have they ceased buying goods, they are increasingly not even participating passively when media is virtually free, like in the case of TV. And they are not building significant new cultural spaces online with the same power, influence, and legitimacy as their precedents. There are almost no barriers to creating and distributing content, and yet the amount of legitimate content with engaged consumers is decreasing.

The U.S., in particular, has seen an explosion of content from cable TV proliferation and new Internet businesses in the last decade, which has made everyone assume the universality of the Long Tail theory. Japan shows the opposite: a decrease in the amount of culture in the market, as well as the number of participants in pop culture. There may not be any parallel to this phenomenon in any other major country.

Next time we look at how the market once made its products for the middle-classes and leading-edge consumers and why it’s no longer profitable to do so.

In five parts, how marginal subcultures took over a Japanese pop culture with no central core nor leading-edge.

Whether or not the country truly suffered something as dire as “lost decades” for the last twenty years, Japan has certainly seen a dramatic change in its social fabric since the bursting of the bubble economy in the early 1990s. Japanese incomes have plummeted since their peak in 1997. Meanwhile companies are shifting more and more job openings to “non-regular” and temporary positions, meaning fewer young workers can even get their foot in the door to future middle-class earnings. Few are confident about their future economic security.

Back when the Japanese economy was strong in the 1980s and even the mid-1990s, Japan arguably had the world’s most vibrant consumer culture. Now in the face of unemployment uncertainty and declining wages, consumers are cutting back, and in response, the marketplace has rapidly shifted from premium goods and services to supplying cheaper substitutes.

So what has this meant for Japanese pop culture? Consumer spending on culture has declined almost parallel to wage decreases, and most markets — music, publishing, fashion — started to slowly implode even before the Internet decelerated demand for analog goods.

The shrinking of cultural markets does not just mean less culture in Japan, however. The hollowing out process has had a distorting effect on the content of the actual culture being produced and distributed. As regular consumers exit the market and leading-edge consumers are forced back underground, “marginal segments” with highly concentrated buying power — particularly, the otaku, yankii, and gyaru — have taken a leadership position in setting tastes and trends. Over the course of this five-part series, we explain this process and also demonstrate the degree to which Japanese pop culture now caters to specific niche audiences rather than reflecting a “mainstream” set of values. Japan may have become the world’s first consumer market without a mass core — and this has significant implications for the future of its cultural exports.

• Part One: Incomes and Consumer Expenditures in Decline
• Part Two: The Implosion of Cultural Markets
• Part Three: Mainstream Consumers vs. Marginal Subcultures
• Part Four: The Rise of Marginal Subcultures
• Part Five: The Difficulty of Exporting Marginal Subcultures

Part One: Incomes and Consumer Expenditures in Decline

Lower incomes, lower allowances

Average Japanese incomes have taken a huge hit over the last 13 years. This chart shows the degree to which salaried employees’ incomes dropped since their peak in 1997. The most significant declines came after 2008’s so-called “Lehman shock,” and even with the slight uptick in 2010 and expected for 2011, wages are still not back to 2008 levels. As Shukan Bunshun calculated, the end result is a loss of ¥220 trillion in lost or declining salaries in the last 12 years (Japan Times). Not all Japanese employees are salaried, of course, but these measures best demonstrate the state of Japan’s middle and upper-middle classes.

Meanwhile the size of the middle class is likely shrinking due to a shift of corporate positions from “regular workers” to “non-regular workers.” Non-regular workers are not guaranteed steady income increases, and therefore, often make 40% of a regular worker salary doing essentially the same job. In 1990, the share of non-regular workers was 20%; in 2007, it was 34% (ref). This has especially affected younger Japanese moving into the workforce for the first time.

Furthermore things have been difficult in the last decade for lower and working class families in Japan, especially the elderly. The number of families receiving government welfare benefits has skyrocketed in the last decade, returning to levels last seen in the early 1960s, before Japan’s “economic miracle.”

Lower incomes mean less discretionary spending. Japanese wives traditionally control the family budget, and in these tenuous times, they are giving less to their husbands as “allowances.” A survey recently found that these allowances are at their lowest point in three decades — ¥76,000 in 1989, now at ¥36,500. Accordingly, men are going out after work less and spending less when they go out. We could assume that parents and grandparents are subsequently giving less to their children in allowances and gift money, although the data suggests that these allowances have not fallen particularly hard. This may be balanced out by the fact that grandparents and parents are able to concentrate smaller payments on fewer children in light of steeply declining birthrate.

Lower expenditures and more inferior goods

With lower incomes and low confidence about future earnings, Japanese consumers have been demanding less expensive products. Many enterprising companies such as clothing brand Uniqlo, beef bowl purveyor Sukiya, and fast food chain McDonalds have reorganized their businesses to provide consumers with the cheapest possible goods. These companies have either taken dominant positions in the market — Uniqlo’s so-called hitorigachi “winner takes all” — or seen record profits like McDonalds.

The proliferation of discount retail and restaurants does not necessarily mean that Japanese people are living worse lives. Deflation has finally brought once sky-high Japanese prices for everyday items in line with Europe and the United States. For example, Uniqlo — which is “extremely cheap” in the eyes of most Japanese — sells relatively high-quality garments at the price American customers expect to pay at a mid-range brand like The Gap. In many ways, deflation has empowered Japanese consumers to get more for their dwindling yen.

What is troubling, however, is the market’s move towards meeting consumer demand with inferior goods. Inferior goods, economically-speaking, are goods that see demand increase as incomes fall. In these instances, consumers choose poor-quality, substitutes for a preferred item. Instead of buying a normal good like fresh deli ham, consumers go for a cheaper, less satisfying product like Potted Meat Food Product. If given limitless choice, the consumer would obviously choose the normal good over the inferior one.

In the case of Japan over the last decade, we have seen a significant rise in popularity of inferior goods and a decrease in demand for premium goods. Japan’s most notable inferior good of the moment is “third-category beer” — a beer-like beverage with nearly zero malt content that sells for slightly less than real beer. Japanese consumers facing no economic constraint would choose Japan’s most iconic (and not particularly expensive) mass market beers such as Asahi Super Dry or Kirin Ichiban Shibori over third-category beer. So what does it say about the consumer market when Japan will soon have a majority “fake beer” market for malt-flavored beverages? Even with falling demand for beer-like drinks, third category beer is seeing growth. This is a sign that the consumer living standard considered normal just a decade ago has fallen dramatically into a new “basket of goods” that would once have be seen as only appropriate for the relatively destitute.

This income-driven demand for cheaper goods is thus changing how companies prioritize production and marketing. Suntory — with a product line that ranges from cheap hooch Tory’s to global award-winning Yamazaki single-malts — has ceased to promote its mid-range whiskeys such as Suntory Old and focuses its mass media campaigns almost exclusively on the cheapest products that can be mixed in low-price highballs. Until recently, Tory’s was a post-war relic that had generally disappeared as the country grew rich, but now Suntory buys extensive train advertisements for this whiskey, which costs only ¥1080 for a 700ml bottle. The company has also invested heavily into entire TV campaigns around the slightly higher-grade but still cheap Suntory Kakubin with stars Koyuki and Kanno Miho.

On the other end of the spectrum, luxury sales in Japan have essentially collapsed. Middle-class Japanese shoppers — buying in Japan and abroad — once made up the single largest global market for European luxury goods. Now China is set to overtake Japan in terms of luxury demand. Although the market for import apparel and accessories peaked in the mid-1990s and department stores — one of the main sites for luxury consumption — have suffered a structural and steady decline since that time as well, the top global brands such as Louis Vuitton, Gucci, and Prada managed to achieve strong prolonged growth within a nominally shrinking market.

Since 2008, however, most of the luxury brands have seen serious drops in sales. And even with luxury’s bounce-back around the rest of the world, Japan experienced a continued decline in sales until a slight uptick very recently. Louis Vuitton and Gucci bags were once the mainstream standard for middle-class (and even lower middle-class) women, but judging from the streets of Tokyo, young women now prefer furoku canvas bags that come for free inside of a magazine. There have been signs of slight luxury business recovery in recent months, but this can mostly be explained as Japan’s upper class going out to shop again and Chinese consumers visiting Tokyo. Luxury goods will likely never again be a part of the middle-class “standard.”

Japan, of course, was always an exception here: Young clerical workers with low incomes generally do not put themselves in debt to buy handbags intended for the very rich. Still, this is another example of how Japanese consumers have completely changed their lifestyle expectations regarding consumption over the last decade. In the next part of the series, we will see how lower incomes and reduced expenditures have directly impacted markets for cultural goods.

Next time: How markets for cultural goods have imploded in the last decade.