–Spending on Hotels, Packaged Tours Continues Rising on Tourism Support Program
–Real Household Income Posts 6th Straight Y/Y Drop on High Food Costs but Energy Subsidies Capping Utility Charges
By Max Sato
(MaceNews) – Japan’s real household spending came in much weaker than expected in March, posting drops both on the year and month, as people continued switching to discount mobile phone plans amid elevated food costs while spending more on traveling and eating out, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover fully from the pandemic-caused slump. The output gap has remained negative in the past few years while real wages have been declining.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people plunged 1.9% on the year in March, giving up all of the 1.6% rebound in February and following a 0.3% dip in January. It was much weaker the median economist forecast of a 0.6% rise (forecasts ranged from a 0.8% drop to a 5.2% gain). The decrease was the sixth in 12 months.
* In fiscal 2022 that ended in March, real average household spending rose 0.7% on year after rising 1.6% in fiscal 2021, slumping 4.9% in fiscal 2020 and falling 0.4% in fiscal 2019.
* “Our overall assessment is that household spending is at about the same level seen in December despite the 1.9% drop in March,” a ministry official told Mace News. “But it has not recovered to the pre-pandemic level and was down 4.2% from March 2019.”
* The real spending adjusted index (2020 = 100) stood at 100.3 in March, down from 101.1 in February, 103.6 in January (the highest since 104.9 in April 2021) and 100.9 in December 2022.
* The decline was led by the widespread move among many mobile phone users to switch to discount plans as their purchasing power has been eroded by surging costs for food and durable goods. Households continued spending less on groceries (fish) and prepared food (bento boxes), compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid contact.
* Households also spent less on high school supplementary education in March, pushing down overall expenditures from a year earlier. “But this category has been weak since November last year and it tends to fluctuate widely, so you have to discount its effect,” the official said. The decline is due to combined factors, such as the falling population aged under 18 years old, rising consumer prices and the trend among schools to finish entrance examinations by the end of December for the school year starting in April, she said.
* Backed by the government’s tourism subsidy program, households continued spending more on eating out, hotels and domestic packaged tours, compared to a year earlier, when the government urged restaurants and bars to cut business hours and people to stay home during the Omicron storm. In 2022, the government resumed restrictions on social and economic activities in 35 of the 47 prefectures in late January and extended strict Covid rules for Tokyo and 17 other jurisdictions until March 21.
* On the month, real average household spending fell a seasonally adjusted 0.8% in March after slumping 2.4% in February and rising 2.7% in January for a seventh decrease in 12 months. It was much weaker than the consensus forecast of a 1.6% rebound (forecasts ranged from 0.3% to 2.9% gains).
* Real expenditures dipped 0.3% on quarter in the January-March quarter after edging up 0.2% (revised down from a 0.4% rise) in October-December and falling a revised 1.0% in July-September, indicating that private consumption provided little contribution to an expected slow economic growth in the first quarter in preliminary GDP data due May 17.
* Japan’s economy is forecast by economists to post a modest 0.2% rebound on quarter, or an annualized 0.6% rise, in January-March as exports and business investment lost some steam amid slowing global growth while eased Covid public health rules mitigated the impact of elevated costs for daily necessities on consumer spending. It would follow zero growth on quarter, or an annualized 0.1% increase, in the final quarter of 2022, when a large drop in private-sector inventories pushed down domestic demand.
* The average real income of households with salaried workers posted the sixth straight year-on-year drop, down 4.5% in March (down 0.9% in nominal terms), after falling 0.8% in February (up a nominal 3.1%). The main bread-earner’s real income in the average household marked the third straight year-over-year drop while the average spouse real income posted the 14th straight rise.
Real Wages Slump; Gradual Pickup in Nominal Base Wages Intact
The gradual pickup in nominal wages in Japan continued while real wages fell on the year for the 12th straight month, data released Tuesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 15th straight year-on-year rise, up a preliminary 0.8% in March, after rising at the same below-trend rate of 0.8% in both February and January. The 4.1% surge in December was led by winter bonus payments that were concentrated at the end of the year.
In real terms, average wages fell a preliminary 2.9% on year in March after slumping 2.9% (revised from a 2.6% drop) in February and 4.1% in January and edging down 0.6% in December. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners’ equivalent rent, which rose 3.8% on year in March after rising 3.9% in February and 5.1% in January. It was above the 3.1% annual rate in the core CPI (excluding fresh food) for the month.
Base wages rose just 0.5% on year, marking the 17th straight gain after rising a revised 0.8% in February, 0.9% in January and 1.4% in December. The key indicator for overall wages has been on a modest recovery trend this year.