By Sam Nussey and Stanley White
TOKYO, June 18 (Reuters) - When flea market app Mercarimakes its market debut on Tuesday, it will mark theappearance of one of Japan's rarest beasts: a tech unicorn.
In most countries, a billion-dollar IPO might suggest thereturn of an equity boom. But in Japan, it sheds light on a"thrift economy" for second-hand items, which is thriving evenas the Bank of Japan tries to stoke inflation.
Mercari's app allows users to buy and sell from each other,swiping and tapping their way through items as diverse asdesigner clothes and toilet paper tubes.
It has been downloaded 71 million times as Japaneseshoppers, faced with weak wage growth and armed withsmartphones, have shed their inhibitions about used goods.
"The deflationary mindset is alive and well," said MarcelThieliant, senior Japan economist at Capital Economics, citingdata showing that households expect incomes to keep falling inthe year ahead.
Founded in 2013, Mercari and information technology startupPreferred Networks Inc are Japan's only two unicorns - startupswith valuations above $1 billion - according to data provider CBInsights.
Mercari joins a series of Japanese companies that have madetheir name by playing the counter-cyclical game. Uniqlo parentFast Retailing Co Ltd and home furnishings chain NitoriHoldings Co Ltd, both known for affordable pricing,have seen years of expansion.
Mercari, however, reduces costs further by allowingconsumers to deal directly with each other, cutting out shopsaltogether.
That's bad news for the country's retailers, who have beenhammered by decades of weak consumption and falling pricesdespite the central bank's aggressive efforts.
Jun Shimada, a senior executive at major Japanese fashioncompany Bay Crew's Group, said the rise of Mercari could end upto be a bigger threat to retailers than internet retailers likeAmazon. Second-hand clothing, except for rarer itemssold as vintage, used to carry a stigma, he said.
"Young people in particular no longer have any resistance tobuying items that do not fall into the vintage category," hesaid.
One woman who bought an Italian leather handbag at one ofBay Crew's stores turned to Mercari after having secondthoughts, uploading Instagram-style shots with her smartphone.
"I made this impulse purchase because I fell in love withthe bluish-green colour of the leather, but ended up carrying itless than 10 times because it didn't match any of my clothes,"she said, trying to resell it for around 10,000 yen ($90.56).
Other online businesses are following in Mercari's steps,with Rakuten Inc's Rakuma app and Start Today Co Ltd'sZozoused offering used-goods services. And in FebruaryeBay Inc announced it was buying Giosis Pte Ltd'sJapanese operations, including the online shopping platformQoo10.
Economists say that in theory, sellers and buyers on suchsites can spend the money they save. But users are also morelikely to think twice about buying items at full price, pushingdown the prices of new goods.
Consumers "can use the internet to compare the prices ofgoods and services nationwide or even globally," Bank of JapanGovernor Haruhiko Kuroda told reporters on Friday, adding that"recently some people say this is a reason why prices of goodsand services are not rising that much."
The BOJ has been aiming for 2 percent consumer inflation,but has struggled to achieve that despite five years of massivestimulus.
Core consumer inflation peaked at a 1 percent annualincrease in February but has since slowed to a 0.7 percentannual increase in April, raising concern among economistsinside and outside the central bank that inflationary pressureis waning.
In an effort to understand what is behind the weak numbers,the BOJ is likely to scrutinise several factors, includingwhether online shopping is driving down prices, according tosources familiar with the central bank's thinking.
The bank is likely to reveal its findings at a policymeeting in July, when it issues fresh quarterly forecasts ongrowth and inflation.
It said in a quarterly report in April that "changes indistribution and deregulation have intensified competition forhighly-commoditised goods and services."
But Kentaro Arita, senior economist at Mizuho ResearchInstitute, said that in the long run, Mercari would be apositive contributor to the economy. He said the company wouldfoster innovation and efficiency, forcing retailers to raisetheir game.
"Mercari and companies like it force bricks-and-mortarretailers to focus more on strengthening their brand andoffering something unique to distinguish themselves," saidArita, who said he uses Mercari.($1 = 110.8200 yen)(Reporting by Sam Nussey, Stanley Whiteand Leika Kihara; Editing by Gerry Doyle)