In Japan Consumer prices have fallen the last four years in Japan, but shoppers don't feel so good about it.
Katsumi Takano's annual pay has held steady through the period, yet the 31-year-old commuter train engineer and father of two doesn't think he's a winner from Japan's deflation.
"When prices go down, my salary doesn't go up, so I don't feel any better," he said, taking an ice cream break with his family after buying tofu, ground pork and huge Japanese scallions for dinner at a discount store near Tokyo. "When prices go up and salaries go up, everyone's happier. When prices go down, everyone's unhappy."
The falling prices come on the tail of more than a decade of economic stagnation. Plunging real estate prices have socked those who bought when the market was up. Most other prices are falling so slowly — less than 1 percent a year — that many people hardly notice.
But the deflation has caught the eye of America's Federal Reserve. Fed Chairman Alan Greenspan has expressed concern that the sluggish U.S. economy could slide into Japan-style deflation.
Deflation, the opposite of inflation, means that prices decline on average. Occasional mild bouts of deflation were common in the late 19th century, when paper money was backed by relatively stable quantities of gold or silver. The severe deflationary spiral during the Great Depression, when prices plunged 25 percent over four years in the United States and Japan, convinced central bankers they had to pull out all the stops to prevent the phenomenon, and economists thought they could do that by printing money. Japan's experience has proved them wrong.
Prices for food, clothing, home appliances and electronics have declined in Japan. Other prices are relatively unchanged. Taxi fares are still $5.60 for the first 1.25 miles, the same as seven years ago. The price of a Toyota compact car has barely risen, up roughly $350 over the past five years.
Wages have been flat or falling. Unemployment has risen to 5.4 percent, and the homeless population is growing. For most, these trends outweigh any economic boost from lower prices, as nervous consumers squirrel away extra money rather than spend it.
Toyota salesman Kazuhiko Minezaki finds it harder to make money than when he started eight years ago. In his showroom, racks with pamphlets touting everything from cell phones to life insurance show how far Toyota has gone to help its dealers make up for falling car sales.
Unsure about his future, the 31-year-old Minezaki, like many Japanese, has curtailed his shopping to necessities.
"I don't want to be pessimistic," Minezaki said, "but still I'm anxious."
Deflation does produce winners.
In ritzy Ginza, some meals still run upward of $150 a person. But lower rents have opened the door for a number of new restaurants that target the $50 range.
Tomoyuki Ishii, 32, manages Monsieur, a restaurant that moved to Ginza from the more pedestrian Kanda district last fall. The move was possible only because Ginza landlords halved the size of the deposit from 50 months' rent to 24 months.
"It's an honor to be in Ginza alongside so many high-class restaurants," said Ishii, who has come a long way from his parents' humble noodle shop in Tateyama, a fishing village south of Tokyo. "Ever since I started as a waiter nine years ago, it's been my dream to have a restaurant in Ginza."
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