–Real Household Income Falls For 4th Straight Month on Rising Cost of Living
By Max Sato
(MaceNews) – Japan’s real household spending posted the second straight year-on-year rise in July as people continued traveling and dining out more freely but fell from June in light of record numbers of new coronavirus infections triggered by the Omicron BA.5 subvariant since late July, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
The government is urging social distancing and vaccinations but refraining from imposing strict public health restrictions to support economic recovery despite the resurgence in Covid infections and deaths.
Real wages continued falling from year-earlier levels in July, clouding the prospects for consumption growth in the July-September quarter.
Bank of Japan Governor Haruhiko Kuroda has repeatedly said the bank would not consider raising interest rates while inflation is not accompanied by solid wage growth and supply continues to exceed demand in the Japanese economy. The BOJ board has projected inflation is unlikely to be anchored around its 2% target at least for the next few years.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people rose 3.4% on the year in July, coming in much weaker than the median economist forecast of a 4.3% rise (forecasts ranged from 2.2% to 5.9% gains). It was the fourth year-on-year rise in the past 12 months, following a 3.5% rebound in June, decreases of 0.5% in May, 1.7% in April and 2.3% in March, a 1.1% rise in February and a 6.9% surge in January.
* The increase in July was led by continued high spending on hotels, domestic package tours and land and air transport as well as eating and drinking out. Expenditures on groceries (fish and vegetables) dropped on year as households had cooked more at home last year during the Covid state of emergency imposed on many regions in the first half of 2021.
* Spending on bento boxes also slumped from July 2021, when many people bought takeout food to watch the Tokyo Summer Olympics at home (no spectators were allowed at game venues), a ministry official said. Households also trimmed spending on TVs, computers, air conditioners and cooking appliances in July. “There was a large replacement demand for those appliances a year earlier, when people were advised to stay home during the Covid state of emergency,” the official told Mace News.
* On the month, real average household spending fell a seasonally adjusted 1.4% in July after rebounding 1.5% in June and plunging 1.9% in May, marking the sixth decrease in the past 12 months. It was weaker than the consensus forecast of a 0.7% drop (economist forecasts ranged from a 2.4% fall to a 1.2% rise).
* The average real income of households with salaried workers plunged 4.6% on year in June (down 1.6% in nominal terms) for the fourth drop in a row after falling 1.4% in June (up a nominal 1.4%), 2.7% in May, 3.5% in April and rising 2.3% in March. The annual consumer inflation rate is above 2% as more firms are passing higher costs onto customers.
* The main bread-earner’s real income in the average household also marked the fourth straight year-on-year drop, down a real 6.8% (down a nominal 3.9%) in July after sliding 2.9% (up a nominal 0.2%) in June. By contrast, the average spouse income posted the sixth straight rise, up a real 0.3% (up a nominal 3.4%), but the pace of increase slowed sharply from a 6.9% rise (up a nominal 9.9%) in June. Firms have been raising wages for part-time workers, who are used as buffers, more than they have for full-time employees in order to meet reopening demand.
Gradual Wage Pickup Continues, Down in Real Terms
The pickup in nominal wages in Japan continued in July while real wages continued falling in the face of elevated food and energy costs, data released Tuesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted the seventh straight year-on-year rise, up a preliminary 1.8% in July after rising a revised 2.0% in June and 1.0% in May. In real terms, however, average wages dipped 1.3% on year for the fourth straight drop after falling a revised 0.6% in June and 1.8% in May.
Base wages rose 1.2% on year in July, marking the ninth straight gain after rising a revised 1.1% in June. The key indicator for overall wages has been on a modest recovery trend in the past year.