Go to any Japanese supermarket and pick up a round box of Snow Brand Megmilk’s “6P Cheese.” Open it and you will find six silver-wrapped wedges of processed cheese arranged like pie slices. The product has been sold in Japan since 1954 – a national staple that appears in children’s lunchboxes, office bento and late-night snacks with a beer. Every Japanese person knows it.

When 6P Cheese launched in 1954, a box weighed 170g and each wedge was 19mm thick. In 2026, it weighs 102g and the wedges are 11mm. The diameter of the round box has not changed. Only the contents have shrunk: 40% over 70 years.

Japan’s economy has done the same thing. The packaging keeps getting larger: nominal GDP swells, tax revenue hits record after record, the national budget reached ¥122 trillion. But the contents (real wages, disposable income, the actual quantity of goods consumers take home) keep shrinking. The macroeconomic data behind this is laid out in The Triple Squeeze. This piece examines why the structural response is blocked.

“Nostalgic thickness”

The Japanese call it suterusu neage: stealth price hikes. The English term is shrinkflation: keeping the price constant while reducing the quantity. Japan has been doing this for decades.

6P Cheese shrank in stages: 150g in 1997, 120g in 2008, 108g in 2014, 102g in 2022. The diameter never changed. Only the thickness was shaved, from 19mm to 11mm. The price per gramme more than doubled in 18 years. None of this shows up properly in the consumer price index, but it registers in every wallet.

In 2025, Snow Brand Megmilk released a limited-edition “Nostalgic Thickness” 6P Cheese to mark its centenary. 170g, 19mm per wedge, the original size. The company openly acknowledged 70 years of shrinkflation and sold it as a commemorative product. The retro version cost 2.5 times the current product.

Think about what it means that “nostalgic thickness” is a selling point. Consumers are not nostalgic for cheese. They are nostalgic for an era when real wages rose every year, when products got bigger rather than smaller, when next year was expected to be better than this one. The company knows this. The consumer knows this. That is why the retro version sells, and that is why it is limited-edition. The 170g Japan is not coming back. Everyone knows that too.

At the current rate, the cheese will eventually be thin enough to see through.

It is not just cheese. Crisp packets stay the same size but contain fewer crisps. Milk cartons shrank from one litre to 900 millilitres. Chocolate pieces got smaller.

Then there are the truly ingenious methods. In 2023, Meiji changed the label on its R-1 and LG21 yoghurt drinks from 112ml to 112g, the same number, different unit. Since yoghurt is denser than water, 112g is less volume than 112ml. A 5% reduction, hidden behind two letters. Meiji’s own press release described it as “changing from volume notation to mass notation.” Stealth within stealth.

When major food companies must resort to shaving millimetres off cheese and swapping units of measurement on yoghurt labels to protect margins, does anyone seriously believe that household incomes are rising and the economy is recovering?

The spiral in the packaging

For food companies, shrinking the product is a rational response to rising input costs. For consumers, the experience is specific and cumulative: paying the same price and getting less. The company shrinks the cheese. The consumer notices. The consumer buys one box instead of two. The company shrinks the cheese again. This is not a metaphor for the deflationary spiral – it is the deflationary spiral, running through product packaging rather than price indices.

The BOJ says it is waiting for a virtuous cycle of wages and prices. Walk through a Japanese supermarket and the evidence says otherwise. Consumers are not waiting for a virtuous cycle. They are cutting spending to survive. Shrinkflation is the corporate survival strategy. The consumer’s survival strategy is simpler: don’t buy.

And the number of hands reaching for the cheese is falling. The Japanese national population shrank by 908,574 in 2024, the largest annual drop on record and the sixteenth consecutive year of decline. Births fell below 700,000 for the first time. The working-age population dropped to 73.7 million. Even if consumer behaviour did not change, a country that loses 900,000 people a year has no arithmetic path to aggregate consumption growth. The cheese gets thinner, the number of people eating it shrinks, and those who remain buy less. A triple contraction.

The sacred rate

The government has responded to the crisis. Just not to the right part of it. The Takaichi government has been active on the supply side: reserve releases, non-Hormuz crude procurement set to replace over half of imports by May, a $56 billion energy deal with the US, accelerated nuclear restarts. All supply-side measures. None of them addresses the demand-side squeeze.

The tool that would directly support every consumer transaction exists: a consumption tax cut. Reducing the rate from 10% to 5% would deliver an immediate, automatic, permanent price reduction across the entire economy. Near-zero administrative cost. No expiry date. No budget deliberation required.

The Ministry of Finance will not allow it. In every crisis, the government’s response is channelled through subsidies rather than tax cuts. Subsidies are temporary, discretionary and debt-funded; the ministry retains control of the tap. A tax cut permanently reduces structural revenue. The tap itself disappears.

The money is there. Fiscal 2026 tax revenue is projected at a record ¥83.7 trillion – the seventh consecutive all-time high. Expenditure hit a record ¥122.3 trillion. Debt servicing alone reached ¥31.3 trillion, with ¥13 trillion in interest payments. Record tax receipts, record spending, record debt service costs – and ¥29.6 trillion in fresh bond issuance on top.

A 5-point consumption tax cut would cost roughly ¥14 trillion, almost exactly the ¥13 trillion interest bill. The arithmetic works. The politics do not. The cheese has lost 40% of its contents over 70 years. The consumption tax rate has never been cut – not once.

For the ministry, the consumption tax rate is an existential asset: broad-based, nearly impossible to evade, counter-cyclical. Surrendering it would structurally weaken MOF’s leverage in every future budget negotiation. So the ministry tolerates ¥29.6 trillion in new bond issuance (which it controls) rather than accept ¥14 trillion in permanent tax reduction (which it can never reverse). The institution’s power takes precedence over the country’s growth.

The self-defeating logic is plain. Record tax revenue of ¥83.7 trillion exists because nominal GDP is inflating. If the triple squeeze kills real demand and nominal growth stalls, the rate MOF defended so tenaciously will stop delivering the revenue it was supposed to protect.

No other G7 country has failed to cut consumption taxes or VAT in at least one of the past three crises: the global financial crisis, COVID and the current energy shock. Japan moved in none of them. Three crises, zero cuts.

The reason is structural. MOF’s tax bureau drafts tax legislation and its budget bureau sets expenditure ceilings for every ministry. Revenue and spending are controlled by a single institution. This structure is unique among G7 fiscal authorities. In the US, tax law is written by congressional committees; the Treasury is an executive agency. In Britain, HM Treasury is powerful but departments retain greater autonomy. Japan’s MOF controls both sides of the ledger, which means a politician who advocates a tax cut risks seeing their constituency’s infrastructure budget squeezed in the next round. In Kasumigaseki, this is understood without being stated.

Shinzo Abe was one of the few prime ministers with enough political capital to move the consumption tax – and even he could only manage to delay a rise twice. He never cut it. Takaichi bills herself as Abe’s successor, campaigns on “proactive fiscal policy” and has positioned herself at a distance from MOF. She even has an energy crisis as political tailwind. She has still not touched the consumption tax rate. A cut falls outwith the bounds of permissible policy in Kasumigaseki, regardless of who sits in the prime minister’s chair.

Churchill at least had a theory

In 1925, Winston Churchill returned sterling to the gold standard at its pre-war parity. The pound became overvalued, exports lost competitiveness, real wages fell. Keynes published The Economic Consequences of Mr Churchill, accusing the Treasury and the Bank of England of sacrificing the real economy to protect an institutional sacred cow. The result was the General Strike of 1926 and a decade of needless stagnation.

In 2026, the BOJ continues raising rates to defend its normalisation credentials while MOF refuses to cut the consumption tax to defend its revenue base. Both treat their institutional commitments as structurally untouchable while the real economy absorbs an external shock that demands flexibility.

The difference is that Churchill at least had a theory. Returning to gold was supposed to restore London’s financial supremacy. It was wrong, but it had an objective. Japan’s rate hikes and consumption tax rigidity have no theory of how they improve the real economy. Cost-push inflation does not respond to rate increases. Holding the consumption tax steady does not restore demand. What remains is institutional inertia: the BOJ normalises because it normalises; MOF guards the rate because it guards the rate.

The shrinkflation state

When Hormuz reopens, the energy arithmetic will change. The arithmetic of Kasumigaseki will not. In the next crisis, the same plasters will be applied, the same bonds issued, and the consumption tax will remain at 10%. The triple squeeze is temporary. The structure that prevents Japan from cutting its consumption tax is permanent.

The system keeps telling consumers not to spend. They are simply obeying.

6P Cheese went from 170g to 102g over 70 years. The diameter of the box never changed. Japan’s economy is the same: nominal GDP inflates, tax revenue hits ¥83.7 trillion, the budget reaches ¥122 trillion; the contents keep shrinking.

A country whose packaging is immaculate and whose contents are disappearing. That is Japan in 2026. It was Japan in 2016. And in 2006. The only thing that has changed is the thickness of the cheese.

When 6P Cheese gets thicker again, you can believe the economy has truly changed.

— Gyokuro

This article is for informational purposes only and does not constitute investment advice. Investment decisions are the reader’s own responsibility.