Inflation and guarding one’s purse strings – are people cutting back on energy consumption for the sake of the global environment, or their household budgets?

1. Introduction

A full year has passed since Covid was shifted to class 5 in Japan’s Infectious Diseases Prevention Act, and we have entered our second Spring post covid. School and corporate entrance ceremonies are now commonly held in person, and it feels like we are now finally able to enjoy Spring as it was intended.
How has Spring this year been for you? I go cycling to Ikuta Ryokuchi Park and Todoroki Ryokuchi Park in Kawasaki City more than usual at this time of year, and the daily changes in the trees and flowers are delightful. The metasequoia trees in Ikuta Ryokuchi Park have grown an abundance of young leaves, completely transforming the forest into a fresh green color. Frogs croak in the iris pond, and tadpoles swim in the waterways there. The purple irises should also be a delight to look at again in May this year

2. Concerns about the household budget (outlook on economization/recovery of household finances)

Thanks to the support of the government and Japan Business Federation, the 2024 Spring labor offensive saw an unprecedented flood of wholesale acceptance of labor union demands by major firms. Lots of us probably saw this news on TV as well, where whiteboards for each company had “union demands accepted in full”.

Amidst this buoyancy, what are consumers’ current views on economization? As usual, I’d like to examine this from the results of a fixed-point survey.

Almost a year has passed since covid shifted to a class 5 infection in Japan. “Concern about infection” has decreased to an all-time low of 35%. At the same time, around 70% of people are still conscious of economizing, and unable to wind this back due to their wage increases. Expectations household finances will recover are on a slight upward trend, indicating a slight rise in expectations for the future. (Fig 1)
With both the Spring labor offensive and regular salary increase periods over, here’s hoping with the upcoming Summer bonus season.

　 Fig 1

3. Outlook on price increases and how they are innovating to economize

Let’s next take a look at consumers’ perceptions regarding price increases and their outlooks on economization.
The category consumers most commonly notice price increases in is “groceries”, followed by “utilities such as electricity, gas, and water”, and “daily necessities and consumables”, with this tendency not sizably changing across the 4 time-points data was tabulated for. A similar tendency is observed with categories people are refraining from buying or economizing with to price increases. (Fig 2)

Fig 2

On examination of “utilities such as electricity, gas, and water”, perceptions that prices are increasing, and the intention to economize both rose sizably in April 2023, but have decreased sizably since October 2023. This is imagined to be due to the commencement of the “Electricity and Gas Price Fluctuation Mitigation Measures Product”, a measure designed to reduce the burden of electricity and gas costs (referred to hereinafter as “energy subsidies”) and subsidy measures offered by local governments. However, announcements have been made that the energy subsidies will end with charges for electricity and gas used in May 2024, and that the subsidy will no longer be available from June onwards. A series of announcements have also been made regarding revisions to water charges as well, so we recommend keeping an eye of future changes here.

On closer look at categories consumers are conscious of economizing with, the top ranks are occupied by groceries including “vegetables”, confectionary/dessert”, “meat/fish” and “rice/bread”.
The fact not only staple foods and side dishes, but also “confectionary/dessert (ranked 2^nd among women!)”, a discretionary item in life rank highly strongly conveys their strength of intention to economize and their sense of urgency regarding engaging in this. (Fig 3)

Fig 3

On comparison chronologically, a slight increase was observed compared to last year mainly in groceries, indicative of consumers’ ongoing efforts to economize. Women display some signs of relaxing their intent to economize such as on the “confectionary/dessert” mentioned earlier, suggestive of their tendency to be somewhat tired of trying to economize.

On examination of their outlook on economization with “electricity/gas” and “water”, while sizable decreases are observed from April last year here too, we recommend keeping an eye on how trends unfold after the government and local government energy subsidy measures end.

4. Changing energy costs

Consumers appear to have had a relatively calm outlook on price increases for “utilities such as electricity, gas, and water” impacted by the energy subsidy measures to date. However, as mentioned above, these measures end with the utility use costs for May, so they are expected to impact household finances after that. How much of an impact are they expected to have?
From this point onward, I’d like to think about this impact going forward by reflecting on the state of consumers before and after the energy subsidy measures were employed using the results from INTAGE’s “Energy Panel Survey”, a continuous survey on the amount of electricity and gas used and usage charges with approximately 15,000 households monthly.

On observation of the shifts in “energy unit costs (yen /MJ: megajoule)” calculated from amount and cost of “electricity” and “utility gas” used via our Energy Panel Survey, electricity has increased 65% from 6.2 yen/MJ in the two years from January 2021 to 10.3 yen/MJ in January 2023, with utility gas increasing 76% over the same period from 3.3 yen/MJ to 5.6 yen/MJ. The unit prices on both electricity and utility gas are estimated to have been reduced by around 15% through the government’s energy subsidies from February 2023 onwards. (Fig 4)

Fig 4

Incidentally, the energy unit costs for “LP gas” only increased 18% from 6.1 yen/MJ in January 2021 to 7.2 yen/MJ in January 2023, a lower rate of increase than for electricity and utility gas. For this reason, LP gas was not targeted by the energy subsidies. (Fig 5)

Fig 5

5. Shifts in amount of energy usage

In January 2023, the unit price of electricity increased sizably by 65% compared to 2 years previous, as did gas by 76% compared to 2 years previous. This was also a time of year when heating expenses are high, so you probably remember lots of TV information programs covering consumers lamenting this increase. Let’s take a look at whether consumers’ energy usage has changed due to these record high fuel prices.

We used the Energy Panel Survey to examine shifts in the amount of energy usage in 2022 and 2023 focusing on January, the time of the year where the amount of energy usage is at its highest. It was apparent that the amount of energy usage per household decreased 8.5% from 3,322MJ in 2022 to 3,040MJ in 2023. Electricity in particular decreased sizably by 9.7% from 2022 to 2023. (Fig 6)

Fig 6

The factors behind the increase/decrease in amount of energy usage by households include changes in household composition such as the number of family members, changes in climate such as warm winters, the spread of energy conservation awareness and efforts, and changes in lifestyle such as increased time at home due to the spread of covid etc. In 2023, energy prices soared due to Russia’s invasion of Ukraine and the depreciation of the yen, with these triggering consumers to make sizable inroads with saving energy with the intention of saving money in order to protect their lifestyles. In addition, on observation of the average monthly temperatures in 11 places nationwide here in Japan, January 2023 was 0.36℃ hotter than January 2022, indicating climatic changes also had some impact here.

In recent years, awareness and efforts regarding environmental protection (SDGs) activities have spread, and consumers have experienced oppressive heat due to global warming, with this deemed to have popularized and established energy conservation efforts such as saving electricity out of consideration for the global environment. However, these analysis results appear to indicate pressure on household budgets due to price increases has furthered this awareness and efforts regarding energy conservation, which must leave consumers with somewhat mixed feelings. How about in your household?

6. Conclusion

On observation of the Energy Panel Survey’s results, government energy subsidies have clearly had an effect on reducing the burden on households. However, the national government subsidy is set to end with the energy used in May 2024. If Russia’s invasion of Ukraine and the depreciated yen continue until the winter of 2024 when households use more energy, household energy usage costs are expected to increase once again. We also have the summer ahead of us when people have more opportunities to use coolers.
Rising energy prices are clearly spurring consumers to actively embrace energy conservation activity (with the effect of reducing the amount of energy used), although in its true sense, it is expected that energy conservation will be advanced through the fostering of awareness of energy conservation among consumers, and advances in energy conservation technology.

In future, we will continue to utilize the Energy Panel Survey along with analysis on ethical outlooks and behavior to consider how positive ethical thought and action can be promoted, such as via fostering awareness of energy conservation.

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On INTAGE’s Energy Panel:
INTAGE has organized an “Energy Panel” to gather intelligence on electricity and gas usage and usage charges from a portion of INTAGE’s consumer panel SCI🄬 monitor panelists. Our Energy Panel Survey identifies the amount of electricity usage and usage charges for electricity and gas from approximately 15,000 households monthly, can link a wealth of demographic information such as number of family members and type of residence with amount of energy usage, and extract and analyze respondents.
For example, we can identify and extract members of husband-and-wife households with high energy usage levels who live in condominiums in the center of Tokyo, and link them to a variety of survey information such as their purchase histories, outlook on life/values etc. for analysis. This can then be leveraged in marketing, such as by defining people with lower amounts of energy usage despite the number of their family members and size of residence they live in as “energy conservation types” to paint a persona of them using characteristics like their daily shopping and outlooks on life.

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