JAPAN: NIELSEN MARKET SNAPSHOT
Japan is the world’s third largest economy with nominal GDP of $US5.2 trillion in 2019, according to IMF estimates. However, the country is facing economic challenges, with GDP declining at 0.6% in the first quarter of 2019, coming off the back of a modest 1.3% growth last year during the same period. Coupled with this, inflation stands at just 0.7%, indicating weakening in the economy and an overall downturn in consumer demand.
A declining and ageing population and growing concerns on healthcare is placing the economy under increasing pressure, despite being a country with large amounts of trade surplus and heavy investments in major economies across the globe. Japan is in need of crucial public and private sector partnerships to wade through economic uncertainties. Recent trade agreements between Japan and the European Union (EPA) could bring welcome respite on import tariffs, leading to benefits to local Japanese companies. This may be a catalyst to re-ignite growth.
Although Asia Pacific has one of the highest consumer confidence levels (117 as at Q1 2019), sentiment remains low in Japan, which recorded consumer confidence* of just 83 in the same period, down five points compared to the previous quarter.
Amidst these challenges, consumers in Japan have become more conservative and a substantial majority (60%) prefer to channel their spare cash into savings. A further 47% are concerned about their personal financial situation and more than half (51%) are trying to cut down their spending on utilities such as gas and electricity. Meanwhile, 49% of consumers are reducing their spending on clothes and 43% are spending less on out-of-home entertainment.
Within the FMCG sector Japan has experienced two consecutive quarters of declining growth (-0.1% in Q1 2019; 0.3% in Q4 2018; and 1.8% in Q3 2018). Despite overall declining growth rates there are some bright spots to be seen, with growth in categories such as home care (up 1.8% at 7.3% share of FMCG) and food products (up 0.8% at 55.9% share of FMCG)** far outstripping the average 0.7% growth this quarter for the FMCG sector.
When it comes to behaviour and attitudes toward brands, Japanese consumers tend to be brand loyalists, with more than one fifth (21%) saying they seldom try new brands, compared to just 8% globally. Notably, brands play an important role for consumers in certain categories, such as personal care where 29% of Japanese consumers are averse to brand-switching. Likewise for coffee and tea brands (24% purchase based on brand) and laundry detergents and household cleaners (20% purchase based on brand).
Although Japanese consumers display a high degree of brand loyalty, there is potential to sway their brand choice, particularly when it comes to value and convenience, both of which play a key role in influencing Japanese consumers’ brand choice — 24% of Japanese consumers say they could be convinced to try a new brand if it offers better value for money, and a similar percentage of consumers (24%) would switch to a new brand if it offers them a more convenient solution.
Present economic uncertainty and market volatility in Japan is affecting consumers’ perception of their personal financial situation, and is likely playing a role in their cautious approach to managing their finances and spending. A marquee event that could provide a certain degree of thrust to consumption is the upcoming 2020 Summer Olympics in Tokyo which holds promise for increased spending given the expected inflow of global audiences and in-bound tourism.
*CCI - Consumer Confidence Index by The Conference Board Global Consumer Confidence Survey conducted in collaboration with Nielsen
**Data Supported by INTAGE