1000 Yen Ramen wall

Increased Japanese inflation is crushing restaurants due to the 1000 Yen Ramen wall. Ramen traditionally has been a working class food in Japan. It’s hearty, nourishing and flavoursome. Some ramen restaurants have even been listed in Michelin restaurant guides.

Ramen from Bone Daddies

The 1000 Yen note is the smallest denomination of note in Japanese country, rather like the 5 pound note in the UK or the 5 euro note in the EU. It’s about worth about £5.20 at the time of writing.

Japan 1000 Yen Note 3706b

Japan went through decades of deflation that flattened prices and made workers poorer. So being able to get a cheap nutritious meal during lunch time at work or after work was invaluable. It also meant that a bowl of ramen had cost 1000 Yen for a long time.

Post-COVID supply chain driven inflation pushed the price above 1000 Yen. That’s when things get strange from a marketing perspective. Consumers who were used to paying 1000 Yen for their ramen couldn’t or wouldn’t pay more. Which is when ramen restaurants hit what the owners describe as the 1000 Yen ramen wall.

In marketing terms this wall is known as a marketing pricing dead zone. Dead zones revolve around three key factors:

  • Customer segmentation: Understanding customer segments and their price sensitivity is key to avoid pricing dead zones. In this case the price sensitivity seems to be unusually rigid.
  • Perception of value: A key consideration in a dead zone is how customers perceive the value of a product at a specific price point. If a product is priced too cheap, customers can assume it’s inferior quality. If a price too high the customers feel they aren’t getting enough value for money. What’s interesting about ramen is that customers aren’t willing to budge on quality or perceived value.
  • Market competition: The presence of competitors with well-positioned prices within a category can create dead zones.  Ramen restaurants tend to be small businesses rather than chains, so they don’t have a lot of market power. They do have competition in terms of substitution for that 1000 Yen note – onigiri, instant noodles and sandwiches from the local combini (convenience store).

What’s fascinating about this situation is that ramen restaurants or an outsider haven’t managed to innovate around the wall. Instead the poor substitute of a sandwich or onigiri from a refrigerator is their option.

It’s more than business being lost, ramen restaurants are neighbourhood staples and an intangible part of Japan’s culinary culture. To give a UK specific example, without the humble ramen shop we wouldn’t have had the Wagamama chain of restaurants.

More Japan related content can be found here.

More information

Try the Michelin-star ramen that’s only 1,000 yen in an unassuming location in central Tokyo | Stars and Stripes

‘Ramen fast pass’ starves lineups, feeds the busy first at popular Tokyo shop – The Mainichi

Record number of Japan ramen eateries went bankrupt in 2024 | Kyodo News

Japan election 2024: How ramen prices have become a top issue for voters – Firstpost

Japan Runs on Vending Machines. It’s About to Break Millions of Them. – The New York Times

Japanese ramen shops must raise prices, or shut, to cope with inflation – The Washington Post

Record Number of Ramen Shops Go Bankrupt in Japan in 2024 – Unseen Japan

Japan runs on vending machines. It’s about to break millions of them. – The Japan Times