"Must Hoard" Stomping Feet... Japan Falls into the 'Worst-Case Scenario'

Last year, the Engel coefficient, which represents the proportion of food expenses in household consumption expenditure in Japan, recorded 28.3%. This is the highest level in 43 years since 1981.

Nihon Keizai Shimbun (Nikkei) and Kyodo News reported this on the 7th, citing the household survey results announced by the Ministry of Internal Affairs and Communications on the same day.

The scene at a Japanese supermarket last year when rice was sold out. NHK.

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The Engel coefficient is an indicator that shows the proportion of food expenses in total consumption expenditure. It is calculated by dividing the amount spent on food by the total living expenses and multiplying by 100. For example, if a household's consumption expenditure is 1.5 million yen and the food expenses amount to 500,000 yen, the Engel coefficient would be about 33.

The Engel coefficient was developed based on the observation that as income levels rise, expenditures on non-food items increase sharply compared to food-related expenses. This was confirmed by German statistician Ernst Engel in 1857 through a household expenditure survey. The trend is called "Engel's Law," and the proportion of food expenses in household expenditure is referred to as the Engel coefficient, named after him.

Last year, the Engel coefficient, which represents the proportion of food expenses in household consumption expenditure in Japan, recorded 28.3%. Getty Images

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Japan's Engel coefficient showed a downward trend until the early 2000s but has been on an upward curve since bottoming out in 2005.

In particular, last year, the rise in food prices such as rice is analyzed to have contributed to the worsening of the Engel coefficient. Japan's rice production last year was 6.79 million tons, an increase of 180,000 tons (3%) from the previous year, but the distribution volume became insufficient.

As a result, rice prices, which had been stable until around last summer, surged by 20-30% compared to the previous year, and shortages occurred mainly in urban areas. The causes include a decrease in the distribution volume of 2023 rice due to the heatwave, increased demand from inbound tourists, and panic buying caused by earthquakes.

Yonhap News

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Nikkei evaluated that "the sharp rise in food prices is becoming a burden on personal consumption."

In fact, the average consumption expenditure of households with two or more people last year was 300,243 yen (about 2.86 million won) per household, which decreased by 1.1% in real terms excluding price fluctuations compared to the previous year.

However, Nikkei reported that monthly consumption expenditure in December last year increased by 2.7% compared to a year earlier, showing signs of improvement as it rose in real terms for the first time in five months.

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