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Mobile Communications

Why Japan turns to old-school phones and away from smartphones

Some surprising figures from MM Research Institute show that the number of smartphones sold in Japan fell in 2014, while sales of basic, old-style flip-phones increased. There's still a substantial gap, with smartphones outselling flip-phones by 27 million to 10 million last year. But while sales of the former dropped by 5.3% in 2014, sales of the latter increased by 5.7%.

Why is this happening? What's the story behind the numbers? There are several possible contributing factors. We'll look at these in turn, with input from people who have lived in Japan.

Japan is a deflating economy

The Japanese economy began deflating in the 1990s and has barely paused since then. In practical terms this means there's less incentive to spend money on new, shiny gadgets.

In a 'stable' economy, which central banks tend to define as one that's inflating at 2% per year, money constantly loses its value. So $100 in a bank today might be worth the equivalent of $98 next year. That's a subtle psychological incentive to consume, which in turn helps to drive economic growth: at least as defined in GDP terms.

Japan's economy, despite occasional bursts of frantic quantitative easing and government fiscal stimulus, is on a gentle deflationary path. This means that money in the bank doesn't lose its value so quickly. In some years it might even gain value. So there's less incentive for consumers to splash out on the newest gadget. This also means that prices for consumer electronics don't fall as fast as they do elsewhere.

The net result is there's less reason for Japanese people to upgrade to the latest, expensive phones with similarly expensive data plans. This seems a plausible explanation.

But Jack Prichard at business intelligence company OptimalBI, who lived in Japan for several years, isn’t so sure.

"I'd tend to discount money factors such as high internet fees. These are the Japanese. There are more Michelin-starred restaurants in Tokyo than any other city in the world and a Japanese whisky was recently judged the world's best. When the Japanese want something they buy it or throw money at it until they have what they consider is the best."

However, Hideki Tadamasa, who recently moved from Japan to New Zealand, believes pricing does matter.

"Up until 2011 there was a charge for buying iPhones and to have a plan. They were both quite pricey. At this time not many people purchased them, and waited for the prices to come down."

He continues, with information that helps explain the recent downward trend (or blip).

"At the end of 2011, iPhone 4S arrived and for the first time in Japan if you signed up for a two-year contract with any other iPhone older than the 4S, you would receive the phone for free and would only have to pay your monthly plan. When this happened there was a huge burst of people buying iPhones. If you were to break your two-year contract you would incur expensive fees, so most people had their iPhones on that two-year contract until the end of 2013."

Tadamasa believes that this two-year lock-in period was enough time to convince many Japanese people that they didn't really need or want a smartphone after all.

Japan's population is getting older

Japan has one of the oldest populations in the world, though other countries are catching up. Social development and improving gender equality are leading to declining birth rates all around the world. Anything under 2.1 live births per woman generally means that a country's population will decline, barring factors such as immigration. Japan's figure is well under two, and immigration is relatively low.

There are other social and religious factors that make Japan a country of older people, which Wikipedia explains well.

Are older people less likely to use smartphones than the younger generations? The evidence from the rest of the world says they are, so this is a potential contributing factor in Japan. Hideki Tadamasa agrees: "Elderly [people] use cheap cellphones that are easy to use."

Fashion, simplicity and privacy

Prichard says cellphone use is very personal for Japanese people.

"When I lived there, there were straps attached to your phone for your wrist and the fashionable Japanese girl would have one for each day of the week. If 'going back to basics' becomes the fashionable thing to do, they will all do it."

Tadamasa thinks that simplicity and privacy are both driving factors. "The 10 buttons used on the flip-phones are incredibly easy to type in the Japanese alphabet and Japanese people love their privacy, so the small flip screen enables them to send messages on busy trains and not be seen. Lastly, a majority of people realised that they only needed their phone for simple things such as sending texts and making calls, and that the functions used on iPhones were just an extra bonus."

National pride

This may seem surprising to Europeans, but it could be a contributing factor in the Japanese market, as Prichard explains.

"The 'best' phone in the world is the iPhone and it isn't Japanese, the second is the Galaxy and Samsung is Korean and that's even worse, Huawei the challenger is Chinese and that's about as bad as it gets. So, as there is no serious Japanese flagship in the market they might have decided to go their own way."

Especially as there are Japanese companies still actively making flip-phones.

A combination of factors

It's unlikely that any one of these factors is the sole reason for the shift in the fortunes of smartphone sellers in Japan. More likely it's the combination that's the key.

What's interesting now is whether the decline in smartphone sales will continue in Japan, and also whether the rest of the world will follow.

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Alex Cruickshank

Alex Cruickshank has been writing about technology and business since 1994. He has lived in various far-flung places around the world and is now based in Berlin.  

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