Commentary: US$25 ski-slope ramen is a glimpse of Japan’s future

TOKYO: Japan has been trying to create a “virtuous cycle” of price and wage increases for over a decade. But there are perhaps only a few places where it has succeeded: Once-sleepy skiing towns where the local economy is dominated by deep-pocketed foreign spending.

In Hokkaido’s Niseko, famous among tourists for its unrivalled powder snow, regular Japanese dishes are going for faintly outrageous prices: ¥3,500 (US$23) for a bowl of tempura soba from a food truck, easily more than three times what one would pay at a sit-down joint in Tokyo; ¥3,200 for the ski-resort staple of katsu curry; ¥3,800 for crab ramen.

This is an increasing trend in weak-yen Japan, as foreigners from Australia or the US barely bat an eyelid at prices still cheaper than what they would pay at home. This influx of tourist spending has, in places, helped break the deflationary cycle that’s kept wages stagnant for most of the last three decades: Hourly wages in the likes of Niseko are some of the highest in the country.

According to Dip Corp’s Baitoru part-time-job search site, the average hourly salary in Niseko (population: 5,000) right now is ¥1,611, above even the ¥1,560 on offer in central Tokyo. Hakuba offers ¥1,464, while the up-and-coming area of Appi Kogen, declared Japan’s best ski resort in the World Ski Awards last year, pays an average of ¥1,936. 

FOREIGN MONEY IS CHANGING THINGS

In a country where real wages across the nation fell by 2.5 per cent in 2023, effectively the most in a year since records began in 1990, foreign money is changing things. External demand, which includes spending by tourists, was the only positive factor in Japan’s otherwise disastrous gross domestic product announcement on Thursday (Feb 15). The country needs to learn the right lessons.

First, it must figure out how to best extract the economic benefit from skiers and snowboarders, estimated at ¥65 billion in a government study in 2018. Winter sports enthusiasts visiting the country dole out an extra ¥73,000 than the average tourist - that’s a lot of noodles. And with prices in Japan so cheap, spending by visitors to the country overall is still lower than in many nations. 

Savills reports that Japan has just 56 luxury hotels, around the same level as South Africa; a tourism industry that has historically focused on the domestic traveller will have to spend to extract value from foreigners with much greater average wealth. 

A related problem is that right now, a lot of that incoming ski money isn’t accruing to Japanese, instead going to other foreigners.

Overseas investors are less cautious about putting the much-needed investment into older resorts that now seemed primed for growth - see, for example, Patience Capital Group’s US$1.4 billion investment in Myoko Kogen - while Japanese developers (and banks) are seemingly still scarred by badly timed bets made at the height of the economic bubble.

JAPAN’S MIDDLE CLASS IS GETTING SQUEEZED

But most pressing is the risk of pricing out locals. On a trip last season to Rusutsu, a Hokkaido resort not far from Niseko, I was shocked to discover that lift prices had risen some 35 per cent to ¥8,800. This year they’ve gone up a further 31 per cent to ¥11,500.

For a Japanese resort, that’s quite the outlay, even if you’re making Niseko money. You would need to work more than 10 hours at the minimum wage in Tokyo, which the government has recently been proudly advertising on trains, to afford that - but just five hours at the minimum wage in Australia (not a wonder Japan sees so many Aussies).

On the other side, even that price is a fraction of what it costs in a US resort village like Vail, Colorado, suggesting there’s room to squeeze tourists more.

Ski shops in Kanda-Ogawamachi, Tokyo’s mecca for winter sports goods, are filled with travellers from Hong Kong, the US and Australia; locals seem a minority, with the number of skiers and snowboarders among them having dropped more than 75 per cent from its 1998 peak. As prices increase, Japan’s middle class is getting squeezed.

Some are trying different routes. During a recent visit to Appi, an up-and-coming resort in the Iwate Prefecture town that also hosts a campus of the elite British school Harrow, I was intrigued by the option to buy a limited-edition “Black Pass”.

The ¥33,000 lift ticket offers early access to the slopes, priority lift lanes and use of a piste only accessible by snowmobile. (As a journalist paid in yen, I stuck with the regular tickets, which are a reasonable ¥7,000 even after a hefty price hike this year.)

Other resorts have taken to offering residents from nearby towns discount tickets, or those that work out cheaper for the type of quick trips locals are likely to favour.

This kind of upselling is something that Japan, where ostentatious displays of wealth are less celebrated, will have to get used to. But you don’t have to visit Niseko to see this in action. Already in Tokyo, you can spot places that are charging “inbound prices” (i.e., those for tourists), which is leading some to call for a dual-pricing system that would offer cheaper services for locals.

A SEPARATION OF WINNERS AND LOSERS

Is tourist money enough to create the virtuous cycle outside of ski resorts? Authorities are hoping it will help. Japan is starting to experience an acute labour shortage in the service sector in particular, and though that’s causing headaches for businesses, it’s also encouraging workers for the first time in decades to seek out firms that can offer something more than just stability.

It also nudges companies to think more efficiently. With staffing so tight, one reason for Rusutsu’s price hike is to discourage people from buying in person from a ticket booth; the resort encourages people to shop online by offering cheaper options. 

But ski resorts are also a reflection of a separation into winners and losers that seems set to accelerate across the country. The government is encouraging firms to move away from seniority-based wage structures to those that reward talent. That’s a good thing on balance, but a lot of the enviable social stability is down to such structures that maintain employment and distribute wealth.

As deep pockets turn skiing into ever-more of an activity for the elite, for every prosperity narrative like Niseko, there are multiple smaller resorts that have closed as the hobby becomes increasingly gentrified.

A similar bifurcation of the labour market into successes and failures will mean creating some workers who can afford those noodles, and others for whom ramen will increasingly become a luxury.