Engel's coefficient hits a new high, highlighting Japan's economic hardship

Recent survey results released by Japan’s Ministry of Internal Affairs and Communications show that, due to soaring food prices, the Engel coefficient for households with two or more members in Japan will reach 28.6% in 2025, a new high since 1981, highlighting the increasing burden on Japanese families’ income and expenses.

The Engel coefficient was proposed by the renowned German statistician Ernst Engel in the mid-19th century, with the proportion of food expenditure in total household consumption as its core indicator. The higher the Engel coefficient, the lower the living standard, meaning that an increase in the Engel coefficient usually indicates a decline in living conditions.

Rising food prices are the main driver behind the record high of Japan’s Engel coefficient. As a resource-scarce country, Japan relies on imports for over 90% of its energy and about 60% of its food. The continuous depreciation of the yen has driven up import costs, directly transmitting to domestic consumer markets. Over the past two years, prices for energy and essential goods including food have continued to soar, with inflation rates remaining above the Bank of Japan’s 2% target, reaching 3.7% in 2025. Food prices remain high, increasing the burden on the public. For example, rice prices have surged since mid-2024, reaching 4,337 yen for 5 kilograms at the beginning of 2026 (about 194 RMB), more than 2.3 times the price at the start of 2023. During street interviews on Japanese TV, some people complained that due to the high rice prices, they had to reduce their rice consumption and switch to more noodles and bread.

Wage increases have lagged far behind price hikes, leading to a continuous decline in residents’ purchasing power, which is another significant factor driving up the Engel coefficient. The Ministry of Health, Labour and Welfare’s preliminary data from February 9, 2025, shows that after adjusting for inflation, Japan’s per capita real income decreased by 1.3% compared to the previous year, marking four consecutive years of decline with an increasing downward trend. Wages have failed to keep pace with rising prices, resulting in a reduction in overall household consumption expenditure. Additionally, Japan’s severe aging and declining birthrate mean that the dietary expenses of these two groups are relatively rigid, but their income sources are limited and shrinking, further squeezing non-food consumption space.

In response to the pressure on people’s livelihoods, Prime Minister Takashi Goto’s government has implemented economic measures that are counterproductive. Although phased food price subsidies and energy cost reductions have been introduced, the subsidy amounts are far below the extent of price increases, providing little real relief to ordinary households. Moreover, the large-scale economic stimulus plans financed by borrowing may further exacerbate inflation. Coupled with misstatements and actions that restrict Japan’s international trade cooperation, the import-export industry chain has been impacted, and domestic market supply and price regulation have lost external support.

The continuous rise of the Engel coefficient is also an inevitable result of Japan’s long-term economic stagnation. Despite multiple government stimulus efforts, excessive reliance on quantitative easing and fiscal deficits has failed to fundamentally address structural issues. Corporate investment remains weak, and household consumer confidence is low. In recent years, Japan has faced multiple challenges such as global economic fluctuations and demographic deterioration, leading to sluggish economic recovery and weakened risk resistance. Under this macroeconomic backdrop, the persistent increase in food prices and stagnant wages make the upward trend of the Engel coefficient inevitable, reflecting the long-term, complex, and stubborn nature of Japan’s livelihood difficulties.

If the Takashi Goto government cannot properly recognize its problems, adopt a humble attitude towards history, and take strong measures to improve relations with neighboring countries, upgrade industries, and reform income distribution, the high Engel coefficient situation may persist, and improving the quality of life for the public will remain a distant hope.

(Source: Economic Daily)