Japan as a Point Superpower: The Messiah of Stagflation or Not

July 13, 2022

Under the hardship of living due to inflation, many countries are offering subsidies and tax breaks. However, under these circumstances, the first policy to be launched in Japan is usually a point service (a loyalty program).

A point service generally refers to a service that gives customers a number of points calculated under certain rules according to the amount of goods and services purchased or the number of times they visit a store, etc.

(Figure: Various types of point cards)

(Source: Soho Freak)

In Japan, point services provided by the private sector, such as video rental stores and electronics retailers, are particularly well-known. Here, we would like to examine this service in a broader sense, focusing on services provided by the government.

For example, in 1999, while the effects of the Asian financial crisis had not cooled down, the Obuchi administration distributed “regional development coupons” as an emergency economic measure. Despite various criticisms, the economy began to recover in the second half of the year after the distribution of the “Regional Promotion Ticket,” and positive growth was recorded for the year after negative growth in the previous year.

(Figure: ”Regional Promotion Ticket” from the town of Daiei, Tottori Prefecture,
designed with the popular anime “Detective Conan”)

(Source: excite)

The “GoTo Campaign” launched by the late former Prime Minister Shinzo Abe as an economic stimulus policy in the era of “with / after corona”, many tourism and food businesses responded that it has had an economic impact.

(Figure: Prime Minister Abe (at the time) at a press conference
on the launch of the “GoTo Campaign”)

(Source: Prime Minister’s Office of Japan)

These public point services are being deployed even under the current inflation. “Myna-points,” which can be obtained by applying for a My number card, an official digital ID issued by the government, and “Reshi-Katsu (receipt program),” which rewards points or cash back based on the amount of receipts issued for purchased items, are being promoted.

Why are these point services always discussed first in Japan, even in the public sector, instead of tax reductions and other measures?

The “lost 30 years” of deflation, with prices and wages not rising, may be the background of this situation. In other words, it needed to solve the living hardships of individual households, and at the same time, it also needed to break away from deflation by stimulating demand.

(Figure: Consumer Price Index (CPI) in Japan)

(Source: MacroMicro)

It is true that the CPI is rising in Japan, and the trend of inflation is certainly imminent, but on the other hand, the current situation where wage growth is not keeping up with the CPI may lead to savings rather than consumption, even if subsidies and allowances are provided.

The point system, which is designed to both raise prices and promote consumption, is a bitter pill to swallow, but it is an economic stimulus measure that is also suited to Japan’s national character.

Hiroyasu HARADA
Manager (Senior Analyst), Global Intelligence Group (GIG)