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Japan’s end of negative interest rates could be CTV advertisers’ golden opportunity

A gold hand reaches out and touches an origami TV.

Illustration by Reagan Hicks / Shutterstock / The Current

Last month, the Bank of Japan (BOJ) lifted its short-term interest rates for the first time in 17 years, as experts predict (healthy) inflation will continue creeping up in the near future after years of deflation.

The BOJ’s move will likely have repercussions on consumers’ purchasing power. It could also spell out more opportunities for advertisers as the Japanese economy sputters back to life.

“The move away from negative interest rates in Japan, while gradual, offers potential for high-saving consumers to gain more disposable income to spend,” says Ken Harada, managing director of Japan at Magnite.

“With streaming content in Japan being consumed across more devices than ever before, it’s likely we’ll see increased investment in ads on streaming platforms as advertisers seek to leverage the ability to forge greater connections with their desired audiences and boost impact across screens,” adds Harada.

Already, last month some of Japan’s largest companies gave their workers the biggest pay raise in 33 years. Firms are likely to keep increasing prices, which could give them room to push up wages, reinvest capital and provide a boost to consumption.

Why this matters

For advertisers intent on reaching Japan’s consumers, connected TV (CTV) may be just the ticket.

Magnite research shows that 71% of TV viewers surveyed in the country watch ad-supported streaming services, and that they spend over two hours a day doing so.

Perhaps more importantly for advertisers, 78% of respondents watching ad-supported streaming trust the ads they see. That’s compared to 60% of social media users who trust the ads they see on social platforms.

“Given the growing number of viewers on CTV and streaming and the benefits of advertising on digital, advertisers — particularly for brands that target younger generations — are likely to expand spending on CTV and streaming in the future,” says Jessica Fuk, research analyst at S&P Global Market Intelligence.

The background

From Tokyo to Osaka, the advertising landscape today looks rather different from that of 17 years ago. Back then, Netflix’s online streaming had just launched and Facebook was still in its infancy. In Japan, newspapers still ruled the media landscape.

Today, ad-supported streaming content fits well with Japanese culture.

“Japanese culture is deeply rooted in the belief that most content is something that can be enjoyed for free, so the shift in disposable time to AVOD [ad-supported video on demand] is definitely a possibility in the future,” says Shohei Okubo, executive manager of the advertising merchandise group in the business development division at AbemaTV, a leading Japanese streamer.

Japanese advertisers have been privy to these winds of change. eMarketer projected that CTV ad spend in Japan would grow 50.3% in 2023 and would grow 34.2% this year.

And while foreign streaming services are hugely popular in Japan, advertisers are spoilt for choice in the domestic market.

In addition to the likes of Netflix, Prime Video and Disney+, CTV marketers can access inventory from domestic streamers like TVer, U-Next and AbemaTV. AVOD streamer TVer is now the country’s most-watched service, according to a Media Partners Asia report, after overtaking Prime Video last year.

Looking ahead

Banking giant UBS sees the Japanese economy at a “critical juncture” as it returns to “nominal growth” after three decades of effectively no nominal GDP growth.

For CTV advertisers, the next window of opportunity in Japan’s streaming landscape may come from Japanese culture.

Netflix’s Asia boss, Minyoung Kim, recently told The Hollywood Reporter that the American giant saw opportunity in shaking up live-action content based on Japan’s storied manga and anime culture, as well as in the country’s untapped upper-income consumer segment.

“A stronger economy can mean that there are more available funds for those in the entertainment industry to invest in content production,” says Magnite’s Harada.

This can result in “more premium and diverse slates of content which cater to a wider demographic, allowing advertisers more choice within a lean forward, high-impact environment, and the ability to target and engage with their desired audiences more precisely,” adds Harada.