- [Peter] Whether you're buying a ticket

for the subway.

(speaking in foreign language)

- Stopping by McDonald's for lunch.

Or shopping for a computer,

the prices of these things don't change much in Japan

but in the US, they're going up,

and inflation hit a three-decade high in October.

Whereas in Japan, inflation is about zero,

and has been that way for nearly 30 years.

In fact, there have been periods

when prices were actually falling, deflation.

So we went shopping around Tokyo

to see how low prices that may seem great

for our wallets could actually be one sign

of a less dynamic and slow-growing economy.

(pensive music)

If you wanna buy electronics in Tokyo,

this is the place to be,

and coming to Akihabara

is also a good place to compare prices

with the US, and see how Japan is dealing

with inflationary pressure differently.

In the US, the price of computers jumped 8%

in the month of October compared to a year earlier,

whereas in Japan, prices of these Notebook computers

actually fell a little more than 1%.

And one of the reasons for that big difference is demand.

As the US has begin to recover, at least economically,

from the pandemic,

there's been an upsurge of demand,

the US has seen a lot of supply chain pressures,

including shortages of parts and materials,

like semiconductors that go into so many products,

including electronics.

And also, container ships have been blocked at ports,

such as Los Angeles and Long Beach.

So they're backed up, and that means a shortage,

and in some cases, it means retailers feel

that they can or must raise prices.

Japan faces many of the same supply chain problems

as the US does but in general,

it has not resulted in price increases in Japan.

One reason is that consumer demand in general

is not strong in Japan, and hasn't been.

And that's part of the inflation story

that Japan has never really experienced

what we see in the US right now.

But companies in the US found it hard

to meet that higher consumer demand

because they aren't able to find enough workers.

So that's driving them to boost salaries

to recruit workers

and the cost then is passed on as higher prices.

And you can see that happening on a menu at McDonald's.

(speaking in foreign language)

- Here in Tokyo, a Big Mac

was the equivalent of about $3.40.

In the US, they're actually raising prices at McDonald's,

and according to the company,

that's largely because of wage increases.

McDonald's said wages have gone up

at least 10% so far this year at US restaurants.

And a survey finds that companies

in the US are setting aside an average 3.9%

of total payroll for wage increases next year,

the most since 2008.

In Japan, we just haven't see that wage price cycle develop.

One reason that wages tend to rise more slowly

in Japan is because of a more rigid labor force.

People are staying at companies for a very long time

and they really don't have the flexibility

to switch jobs without great personal loss.

So companies are not really under pressure

to offer these people wage increases.

Because wages don't go up here,

people aren't willing to open up their wallets.

One survey by the Bank of Japan found

that about half of people think of price first

when making a purchase,

and they tend to reject any retailer

that raises prices.

Companies have found they're better off

keeping their prices level.

(coins clanging)

So for example, train ticket prices in Japan

haven't gone up that much for the last 30 years.

Whereas in the US, the minimum fare

on the New York Subway has more than doubled

over the same period.

(coins clanging)

Besides train tickets,

you see flat prices really all across the economy.

For example, Eon, which is one Japan's biggest retailers

putting signs in its stores saying prices frozen!

At least until the end of the year.

Prices that don't change very much

can be reflective of a society

that doesn't change very much.

And that could be a good thing or a bad thing,

depending on your perspective.

Japan is still a pretty vibrant place.

It's a stable society,

it has kept its unemployment rate low

but it tends to be accompanied

by other phenomena that are not so favorable,

such as static wages, such as an economy

that seems to lack some of the dynamism

of the US where you have a new company like Tesla

storming onto the scene

and seizing a big part of a market like cars.

You can see some of that recently

in growth figures.

Japan's GDP shrank at an annual pace of 3.6%

in the third quarter,

whereas in the US, the figure was 2.1% growth.

Low prices and prices that never go up

may sound like a good thing

but they can also reflect

larger economic problems in a country.

(pensive music)