PEST: Economical

The Japanese economy is on a downhill and Japan has been battling with deflation and falling consumer prices for years. According to the latest data, the core consumer prices index fell 0.1% in November 2012. This means that the prices of goods are dropping. The way the Japanese government intends to solve this is to spur domestic demand and boost domestic consumption, but this is not working as deflation is occurring, and prices of goods are dropping, therefore consumers are putting off prices to hope for a cheaper deal later on, Japan also has the highest saving rate in the world, therefore consumers are less likely to spend money in the first place. This affects McDonalds in a major way as Japan has the second most number of McDonalds in their country, just after USA with over 3600 restaurants. Since deflation is occurring/ the economy is on a downhill and Japan having such a high saving rate, people will be less likely to spend money on things such as fast food and they will be less likely to eat out. Therefore McDonalds will have a consumer drop. Furthermore, McDonalds can't appeal to consumers by lowering their prices because they still have to pay their workers, and the material they use to make their product will still be the same price and if they lower the price on their product, they will lose profit. On the other hand, they can't raise the price on their products to earn profit as the economy is under such pressure.

Link to Article:

http://www.bbc.co.uk/news/business-20855924