A Seiyu outlet in Akabane, part of Wal-Mart Stores.

Not long ago, many Japanese bought so many $100 melons and $1,000 handbags that this was the only country in the world where luxury products were considered mass market.  Even through the economic stagnation of Japan’s so-called lost decade, which began in the early 1990s, Japanese consumers sustained that reputation. But this recession has done something that earlier declines could not: turned the Japanese into Wal-Mart shoppers.


In seven years operating in Japan, through a subsidiary called Seiyu, Wal-Mart Stores has never turned a profit. But sales have risen every month since November, and this year, the retailer expects to make a profit.

That is an understatement. Across the board, discount retailers are reporting increases in revenue — while just about everyone else is experiencing declines, in some cases, by double digits.

As a result, the luxury boutiques, once almighty here, are reeling.

Sales at LVMH Moët Hennessy Louis Vuitton, makers of what has long been Japan’s favorite handbag, plunged 20 percent in the first six months of 2009. In December, as the global economic crisis unfolded, Louis Vuitton canceled plans for what would have been a fancy new Tokyo store.

In the 1970s and ’80s, and even as the economy limped through the ’90s, a wide group of consumers spent generously on Louis Vuitton bags and Hermès scarves — even at the expense of holidays, travel and, sometimes, meals and rent.

Now, the Japanese luxury market, worth $15 billion to $20 billion, has been among the hardest hit by the global economic crisis, according to a report by the consulting firm McKinsey & Company. Retail analysts, economists and consumers all say that the change could be a permanent one. A new generation of Japanese fashionistas does not even aspire to luxury brands; they are happy to mix and match treasures found in a flurry of secondhand clothing stores that have sprung up across Japan.

“I’m not drawn to Louis Vuitton at all,” said Izumi Hiranuma, 19.

“People used to feel they needed a Louis Vuitton to fit in,” she said. “But younger girls don’t think like that anymore.”

In the new environment, cheap is chic, whatever the product.

In supermarket aisles, sales of lowly common vegetables — like bean sprouts, onions and local mushrooms — are up. (Bean sprouts, which sell for as little as 25 cents a bag, are a particularly good substitute for cabbage, which can go for about $4 a head.)

And instead of melons, Japanese shoppers are buying cheap bananas, pushing imports up to records.

“I’ve cut down on fruit since last year, because of the cost,” said Maki Kudo, 36, a homemaker shopping at a Keikyu supermarket in central Tokyo. “Instead of brands, I now look much more at cost.”

Thrift is being expressed even in unlikely measures like umbrella sales, which have spiked as more Japanese opt to brave rainy weather on foot rather than hail a taxi, according to a survey by the Dai-Ichi Life Research Institute.

In 2008, average household spending fell a record 69,509 yen, or $762, to 3.5 million yen, or $38,475, from a year earlier, and is expected to fall again this year, said Toshihiro Nagahama, chief economist at Dai-Ichi Life.

Underlying Japan’s accelerating frugality is a “deflationary gap” of 40 trillion yen in the Japanese economy, a situation where total demand falls short of what an economy produces. When this happens, companies cut prices, but since they still do not make money, they have to lay off workers. Fewer workers mean still less demand, creating a vicious circle, and prices fall further.

The dismal economy encourages thrift, too. Unemployment is at a record high of 5.7 percent, compared with 9.7 percent in the United States. A troubled government pension system, as well as ballooning government debt, has driven a widespread fear of the future, prompting people to save, not spend.

The Democratic Party, which rode a wave of discontent over the economy to electoral victory last month, has pledged to increase household incomes through tax breaks and generous subsidies for families with children. But economists here worry that the deflationary cycle could prove hard to break as competitive price-cutting rages.

A heated price war has erupted, for instance, in the already cut-rate category of “imitation” beers, a poor man’s brew made with soy or pea protein instead of barley and hops.

In July, Seven & I Holdings Company, which runs the 7-Eleven chain, introduced a new line of imitation beer for $1.35 a can; the same month, the Aeon shopping center brought out its own beer beverage for about $1.09. The Daiei supermarket chain then lowered prices on its beer to less than a dollar.

U.G. — the sibling brand of Uniqlo, the global clothing retailer known for its low-cost fleeces and T-shirts — started a jeans war when it introduced pants for 990 yen this year. Aeon soon followed suit with jeans selling for 880 yen.

Seiyu, the wholly owned Wal-Mart subsidiary, says it plans to sell similarly priced jeans this year.

Of course, for some retailers the circle is more virtuous than vicious.

Thrift has propelled Hanjiro, a secondhand clothing store chain popular among young Japanese, to 19 stores, from just one store in 1992. When Hanjiro opened a new store in Saitama, which borders Tokyo, in April, about 1,000 eager young fans lined up for a door-buster 290-yen T-shirt special. Of course, frugality is good for Wal-Mart, which posted better-than-expected second-quarter earnings last month. Japanese consumers are snapping up Seiyu’s $6 bottles of wine — sourced through Wal-Mart’s international network — as well as $86 suits and $87 bicycles.

In fact, Seiyu has ignited a price war of its own, with its “bento” lunch-in-a-box of rice and grilled salmon for 298 yen. Abandoning a custom here for supermarkets to make their bento boxes on site, Seiyu cut costs by assembling the lunches at a centralized factory.

Seiyu bet that Japan’s frugal consumers would not care about the change, as long as the bentos were cheap. Seiyu was right; the bentos have set off a line of copycat supermarket bentos.

“Price is No. 1 in my mind,” said Chie Kawano, an elderly shopper at Seiyu’s Akabane store in northern Tokyo, a bento box in her basket. “I don’t need anything fancy.”

Via New York Times