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Municipal Purchase Vouchers a Big Hit

December 2, 1998

In an effort to pull local shopping districts out of recession, more and more municipal governments have been turning to issuing of so-called purchase vouchers. These vouchers, which can only be used in the local area, are meant to encourage local spending--in some cases, the local government subsidizes a set portion of the face value of vouchers issued by a local business association. After observing the success of these programs, Japan's national government is planning to distribute vouchers to children and low-income senior citizens nationwide in spring 1999 as one cornerstone of an economic recovery plan.

Spend More and Save!
A shopping district federation in Minato Ward, located in the heart of Tokyo, was one of the first groups to use municipal purchase vouchers, spearheading this latest movement to stimulate consumer spending. In April 1998, the federation began issuing purchase vouchers in 500 yen (4.17 U.S. dollars at 120 yen to the dollar) denominations, which could be used in 2,000 stores throughout the ward. Those who bought 100,000 yen (833 dollars) or more worth of vouchers received an additional 10% worth, and those who purchased 1 million yen (8,333 dollars) or more were given an extra 20%. The cost of the bonus coupons was covered by 60 million yen (500,000 dollars) in local government funds.

Buying a million yen worth of coupons seems like a huge expense, but in all over 200 people went for the 20% bonus--one buyer even shelled out over 3 million yen (25,000 dollars)! When asked why they were willing to spend so much, the shoppers gave various reasons, such as "My family spends a million yen in less than a year anyway," and "I intend to buy an expensive item soon." The local bonus funding ran out in only two months, upon which coupon sales were ended; but the program was a great success that saw a total of 360 million yen (3 million dollars) worth of vouchers put in shoppers' pockets.

Six months after starting the program, over 70% of the vouchers had been used, much to the joy of local shop owners. In the past, government economic recovery efforts have focused on programs oriented toward businesses, such as low-interest loans. The success of Minato Ward's program aimed at personal consumption has drawn attention, however, and more and more municipal governments are embarking on similar programs.

Tokyo's Itabashi Ward, for example, started in September 1998 to subsidize discounts of vouchers issued by the ward's shopping district federation.Vouchers with a face value of 500 yen (4.17 dollars) are sold at 450 yen (3.75 dollars).Although extremely popular, the vouchers have a downside: Shoppers cannot get change when shopping with them. Nevertheless, they remain a hit among shoppers who note that their 10% savings are worth more than the interest that could be earned from a bank account.

National Program In the Works
The national government, too, has latched onto the idea of vouchers as part of its plan to stimulate the economy. After an opposition party proposed a program to distribute 30,000 yen (250 dollars) worth of coupons to every Japanese citizen--some 4 trillion yen (33.3 billion dollars) in all--the government and ruling Liberal Democratic Party went to work on a similar plan.

During the deliberations, not a few worries were brought up about distributing free vouchers on a national scale. Concerns include whether they will really stimulate consumption, how to prevent counterfeiting, and ways to ensure even distribution. Nonetheless, in early November 1998 the parties reached agreement on a plan to distribute merchandise coupons to some 35 million people. The national government will cover the cost of the coupons, which are to be distributed in early 1999 by municipal governments. They will be given to families with children under 15 years old, low-income senior citizens, and the disabled; stores accepting the coupons will be designated by the local governments distributing them.

The government--along with the rest of Japan--is hoping next spring will see the success of local schemes repeated on a national scale.

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Trends in JapanEdited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.

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