–Govt Official: Household Spending Trend Flat If Special Factors Excluded
–Spending on Hotels, Transport Stays Above Year-Earlier Levels
–Real Household Income Dips but at Slower Pace; Real Wages Down Amid Retail Price Markups
By Max Sato
(MaceNews) – Japan’s real household spending was sluggish both on the month and year in November as many families saw their purchasing power eroded by a relentless series of markups in food, utilities, and durable goods, while people continued spending on domestic travel, aided by government discounts, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Spending unexpectedly fell on the year but that was largely due to two temporary factors: Mild weather dampened demand for winter clothing, heaters, and blankets; mobile and landline phone charges dropped compared to November 2021, when bill payments were made for both October and November (the last two days of October 2021 fell on a weekend and thus charges for that month were carried over).
Many Japanese regions had plunged into the eighth wave of the pandemic by late November, with new Covid cases and death tolls rising fast toward the year-end holiday season and clouding the prospects for consumption growth in the final quarter of 2022.
Real wages marked the sharpest drop in over eight years as consumer inflation is surging and small businesses, which employ about 70% of the Japanese workforce, cannot afford to offer sharp salary increases to match price hikes.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people fell 1.2% on the year in November, coming in much weaker than the median economist forecast of a 0.5% rise (forecasts ranged from a 0.8% drop to a 1.0% gain). It was the first year-over-year drop in six months and the fifth in the past 12 months. It followed increases of 1.2% in October, 2.3% in September, 5.1% in August, 3.4% in July and 3.5% in June. August’s 5.1% gain was the largest since expenditures surged 6.9% in January 2022.
* Without the one-off factors of the unusually mild weather and the irregularity in phone bill payments seen a year earlier, real spending is estimated to have fallen just 0.4% on the year, a ministry official said. “We see the core trend of household spending as being flat,” he said.
* The decrease in November was led by lower spending on communications, which pushed down overall expenditures by 0.82 percentage point as well as fresh fish and clothing (winter coats), each making a negative contribution of 0.29 point. The recent trend is that people are spending less on groceries, particularly fish, as households had cooked more at home in the previous year. The Covid state of emergency was imposed on many regions from early January to mid-March in 2021 and from late April until late September that year.
* By contrast, spending on domestic package tours, hotels and air/land transportation remained on the uptrend. Even compared to the pre-pandemic November 2019, spending on accommodations rose 30.3% in November after soaring 52.6% in October and dipping 9.6% in September. But spending on train fares dipped 14.2% on levels seen three years earlier, following an 8.0% rebound in October and a 28.2% drop in the prior month.
* On the month, real average household spending fell a seasonally adjusted 0.9% in November after rising 1.1% in October, rebounding 1.8% in September and following decreases of 1.7% in August and 1.4% in July. It was the sixth decrease in the past 12 months and weaker than the consensus forecast of a 0.4% fall (economist forecasts ranged from a 1.3% dip to a 0.3% rise).
* The average real income of households with salaried workers fell 0.3% (up 4.2% in nominal terms) on the year in November after falling 0.9% (up a nominal 3.5%) in October and posting its first rise in six months in September with a small 0.2% gain (up a nominal 3.7%). It followed real decreases of 1.8% (up a nominal 1.6%) in August and 4.6% (down a nominal 1.6%) in July. The annual consumer inflation rate is edging close to 4% as more firms are passing higher costs onto consumers.
* The main bread-earner’s real income in the average household marked the eighth straight year-on-year drop, down 2.2% (up 2.2% in nominal terms) in November, after falling 2.3% (up a nominal 2.0%) in October, 2.2% (up a nominal 1.2%) in September, 3.4% (flat in nominal terms) in August and 6.8% (down a nominal 3.9%) in July.
* By contrast, the average spouse income posted the 10th straight rise, up a real 4.6% (up a nominal 9.3%) in November, after rising 6.6% (up a nominal 11.3%) in October, 5.7% (up a nominal 9.4%) in September, 5.2% (up a nominal 8.9%) in August and 0.3% (up a nominal 3.4%) in July. Firms tend to use non-regular workers as buffers during economic swings. As the economy reopens further, retailers, hotels and restaurants are hiring more people. “The participation rate of women workers is rising,” the ministry official said.
Real Wages Slump; Gradual Pickup in Nominal Base Wages Intact
The gradual pickup in nominal wages in Japan continued while the drop in real wages accelerated as the prices for daily necessities remain on the uptrend, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 11th straight year-on-year rise but the pace of increase decelerated to a preliminary 0.5% in November after rising 1.4% (revised down from 1.8%) in October and 2.2% in September. It was the weakest figure since December 2021, when total earnings fell 0.4%.
In real terms, average wages plunged a preliminary 3.8% on year for the eighth straight drop after falling 2.9% (revised down from a 2.6% drop) in October and 1.2% in September. It was the deepest drop since the 4.1% slump recorded in May 2014, when consumer inflation was temporarily boosted to above 3% after the sales tax was raised to 5% from 3% in the previous month. If the effects of the tax increase are excluded, it was the largest drop since the 4.2% fall in December 2009.
To calculate real wages, the ministry uses the overall consumer price index minus owners’ equivalent rent, which surged 4.5% on year in November after a similarly sharp 4.4% rise in October. It was well above the 3.8% rise in total CPI and the 3.7% gain in core CPI (excluding fresh food) for November.
Base wages rose 1.5% on year in November, marking the 13th straight gain after rising 1.0% (revised down from 1.3%) in October and 1.4% in September. The key indicator for overall wages has been on a modest recovery trend this year.