A decade lost to deflation has changed the landscape in Ginza, Tokyo’s premium shopping district. On the main street, a Gucci store has been replaced by low-cost fashion outlet XXI Forever. Next door to luxury jeweller Mauboussin, the casual clothes retailer g.u. is doing a brisk business offering cotton maxi dresses for Y990.
Japan has been mired in deflation since 1999, a period known as the “lost decade”. Consumer prices, excluding food and energy, have fallen every year since, with the exception of 2008, when prices were flat. Meanwhile, nominal gross domestic product, which reflects the impact of deflation, has fallen from Y505tn in 1999 to Y468tn ($5.8tn) last year.
The long-term slump has forced businesses in Japan to slash costs and, in some cases, completely rethink their business model. Some Japanese companies have managed to avoid the worst effects of deflation and even thrive in difficult economic circumstances. As such, they offer some valuable lessons for businesses settling down for the long haul in the beleaguered economies of the west.