–Spending on Travel, Dining Stays Above Sept 2021 When Covid State of Emergency Was in Place
–Real Household Income Edges Up but Real Wages Still Down Amid Rising Cost of Living
–July-Sept Household Spending Dips Q/Q, Indicating Only Limited Consumption Boost in Q3 GDP Growth
By Max Sato
(MaceNews) – Japan’s real household spending posted the fourth straight year-on-year rise in September, in reaction to last year’s Covid state of emergency, and rebounded on the month after two months of decline caused by record numbers of new coronavirus infections, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Household spending suffered a slight setback on the quarter in July-September while posting a solid gain on the year. The 7th wave of the pandemic eased in September but for the whole quarter, private consumption might have made only a limited positive contribution to an expected modest GDP growth in the third quarter, which is believed to be driven mainly by robust business investment (Q3 GDP data due on Nov. 15).
Going forward, the upward momentum in personal expenditures on traveling and dining out appears to be intact in October, when the government launched a new nationwide program to provide subsidies on domestic traveling and eased border restrictions, hoping to shore up tourism.
On the downside, real wages continued falling from year-earlier levels in September amid widespread price markups for energy, food and durable goods, data from the Ministry of Health, Labour and Welfare showed Tuesday.
At its latest policy meeting on Oct. 27-28, the Bank of Japan board decided unanimously to maintain its super-low interest rate targets along the yield curve and large asset purchases to help the economy recover to pre-pandemic levels and anchor inflation around its stable 2% target.
BOJ Governor Haruhiko Kuroda testified in parliament last week that the bank may make its yield curve control framework “flexible” in the future when it becomes necessary to adjust its policy stance, but also argued that at this point it is best for the bank to keep its easing stance while the economy has a negative output gap and real wages are falling.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people rose 2.3% on the year in September, coming in slightly softer than the median economist forecast of a 2.6% rise (forecasts ranged from 0.3% to 4.0% gains). It was the fourth consecutive year-over-year rise and the sixth in the past 12 months. The increase followed a solid but smaller-than-expected 5.1% gain in August, a 3.4% rise in July, a 3.5% rebound in June. August’s 5.1% gain was the largest since expenditures surged 6.9% in January.
* The increase in September was led by continued high spending on hotels, domestic package tours, train fares, and now airfares, as well as eating and drinking out, largely as seen in recent months. Expenditures on groceries, particularly fish, dropped on year as households had cooked more at home last year during the Covid state of emergency imposed on many regions from early January to mid-March and from late April until late September 2021.
* On the month, real average household spending rebounded a seasonally adjusted 1.8% in September after decreases of 1.7% in August 1.4% in July, a 1.5% rebound in June and a 1.9% plunge in May. It was the sixth increase in the past 12 months, and firmer than the consensus forecast of a 1.6% rise (economist forecasts ranged from a 0.4% fall to a 3.3% rise).
* In the July-September quarter, household spending dipped a real 1.6% (down a nominal 0.7) from April-June, when it rose 2.0% (nominal +3.2%) following a 1.8% dip (down 0.7% in nominal terms) in January-March. Real core expenditures (excluding housing, vehicles and remittance), a key indicator used in GDP calculation, showed a slightly smaller 1.0% drop on quarter.
* Japan’s gross domestic product for the July-September quarter is forecast by economists to post fourth straight quarterly growth, up a modest 0.4% rise, or an annualized 1.6% rise, as the government refrained from urging strict public health rules to reopen the economy further, while net exports are seen down amid slowing global growth and surging import costs. Business investment is seen up 2.0% on quarter, the same as in April-June, while the increase in consumption is expected to have slowed to 0.2% in Q3 from 1.2% in Q2.
* The average real income of households with salaried workers edged up 0.2% on the year in September for the first gain in six months (up 3.7% in nominal terms), after falling 1.8% (up a nominal 1.6%) in August, 4.6% in July (down a nominal 1.6%) and 1.4% in June (up a nominal 1.4%). The annual consumer inflation rate is above 3% as more firms are passing higher costs onto consumers.
* The main bread-earner’s real income in the average household marked the sixth straight year-on-year drop, down 2.2% (up 1.2% in nominal terms) in September, after slipping 3.4% (flat in nominal terms) in August, 6.8% (down a nominal 3.9%) in July and 2.9% (up a nominal 0.2%) in June. By contrast, the average spouse income posted the eighth straight rise, up a real 5.7% (up a nominal 9.4%) in September, after rising 5.2% (up a nominal 8.9%) in August, 0.3% (up a nominal 3.4%) in July and 6.9% (up a nominal 9.9%) in June. Firms have been raising wages for part-time workers, who are used as buffers during economic upswings and downswings, more than they do for full-time employees.
Trend: Gradual Nominal Wage Pickup Intact, Down in Real Terms
The pickup in nominal wages in Japan continued, with a slight uptick in September, while real wages continued falling in the face of elevated costs for energy, food and durable goods, data released Tuesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted the ninth straight year-on-year rise, up a preliminary 2.1% in September, after rising 1.7% in August, 1.3% in July and 2.0% in June. In real terms, however, average wages dipped 1.3% on year for the sixth straight drop after falling 1.7% in August, 1.8% in July and 0.6% in June. Base wages rose 1.3% on year in September, marking the 11th straight gain after rising 1.5% (revised down from 1.6%) in August. The key indicator for overall wages has been on a modest recovery trend in the past year.