If you go to a consumer electronic shop in Japan, you will often see advertisements offering 1 yen for a previous generation iPhone by switching from another company with a line contract.
In Japan, it has always been the norm not to buy a smartphone on its own, but to have a line contract with it. One of the reasons why the iPhone market share in the country is the highest in the world is because the price of the iPhone handset is built into the price of the line contract, making the price seem less expensive.
How iPhone discounts work
That is why major carriers offer discounts on iPhones to attract new subscribers and customers switching from other companies. For carriers and retailers, there is no benefit in offering discounts on individual handset purchases.
Furthermore, this scheme is the Ministry of Internal Affairs and Communications’ policy of separating communication and handset. Since the introduction of the MNP system, which allow the customers to transfer their mobile phone numbers from one company to another, the mobile phone industry has been engaged in a battle to attract customers. Dealers have been trying to attract new customers by offering big discounts on bundled contracts of smartphones and lines. Some shops even offered what seemed like excessive discounts, such as “300,000 yen discount for a family switching over”.
The Ministry of Internal Affairs and Communications (MIC) took issue with this overheated preferential treatment of new users. The Ministry’s logic at the time was that the major carriers were treating long-term users unfairly. They use the monthly communication charges paid by users as a source of discounts, but instead of using this source to reduce communication charges and expand services, they are spending it on attracting new users. That is why they will be able to reduce the price of telecoms.
Excessive incentives for new subscribers could be eliminated by regulating discounts on bundle sales. In October 2020, the Ministry of Public Management, Home Affairs, Posts and Telecommunications (MIC) legislated a policy of “separation of communications and handsets” as a sales guideline for the mobile industry. This effectively imposed regulations on the major carriers and their dealers.
This regulation stated that “discounts on handsets conditional on a line contract would be limited to a maximum of 20,000 yen. Also, in the event that the handset was combined with a telecom company contract, the discount could not exceed to 20,000 yen.
However, there was an exemption to this rule and that is, there is no limit to the amount of the discount if it was not accompanied by a line contract. This means that discounts of 20,000 yen or more are allowed if a contract is not required. This is designed to prevent manufacturers from voluntarily reducing the price of “out-of-date” products, such as consumer electronics.
Buying only an iPhone
The law has been amended to limit discounts to 20,000 yen with a contract. For example, if you can buy an iPhone SE for ¥1 with a line contract, you can buy an iPhone only for ¥2,001 and the consumption tax of 10% is already included.
As of this writing, the iPhone SE is selling for 49800 yen at the Apple Store, which means the shop is discounting the price by 27,799 yen. The result of this is that shops tend to avoid selling the iPhone alone as it is not profitable and the sales clerks generally lie to you that they don’t have it in stock if you only want to get the iPhone.
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