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.