–Drop Also Due to Continued Shift to Lower Mobile Phone Plans; Spending on Traveling, Eating Out Remains Strong
–Real Household Income Posts 8th Straight Y/Y Drop on Elevated Costs, Shorter Overtime Working Hours
By Max Sato
(MaceNews) – Japan’s real household spending fell more sharply than expected in May for a third straight decline on the year as motor vehicle purchases, a volatile factor, slipped after a recent pickup, and mobile phone users continued switching to discount plans amid high costs for daily necessities, but spending on traveling and eating out remained strong on pent-up demand, data released Friday 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 negative output gap has narrowed recently but real wages remain depressed. Nominal wages are expected to grow at a fast pace this year amid labor shortages in some sectors.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people slumped 4.0% on the year through May after slumping 4.4% through April, falling 1.9% through March and rebounding 1.6% through February on a 0.3% dip through January. It was weaker than the median economist forecast of a 2.5% drop (forecasts ranged from a 2.9% drop to a 0.9% gain). The decrease was the sixth in 12 months.
* Most of the 4.0% decline came from volatile factors comprising motor vehicle purchases and “other expenditures” (financial support for dependents, etc.), which together pushed down the overall spending by 3.55 percentage points.
* Core real expenditures, which exclude volatile items like housing (repairs, maintenance, rent), automobiles, gift money and support for family members who live separately, fell at a slower pace of 1.5% on year in May.
* The real spending adjusted index (2020 = 100) stood at 97.9 in May, down sharply from 99.0 in April, 100.3 in March, 101.1 in February and 103.6 in January (the highest since 104.9 in April 2021). It was the lowest since August 2021, when the index was also at 96.2.
* The decline was led by a pullback in purchases of motor vehicles (cars, trucks, motorcycles and boats) after improved supply chains had supported faster deliveries in recent months, as well as the widespread move among 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 and prepared food, compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid close contact.
* Backed by the government’s tourism subsidy program, households continued spending more on traveling and eating out, compared to a year earlier when Covid restrictions were still in place. As seen in April, people also spent more on overseas trips, particularly during the Golden Week holidays through early May, as the government had ended most of its border control on entries and re-entries by end-April. Real spending on electricity rose on the year through May as utility prices were lowered by subsidies and a cut in the renewal energy promotion surcharge on electricity bills.
* On the month, real average household spending fell a seasonally adjusted 1.1% in May after falling 1.3% in April, dipping 0.8% in March, slumping 2.4% in February and rising 2.7% in January. The decline was the eighth in 12 months and weaker than the consensus forecast of a 0.5% rise (forecasts ranged from being flat to a 3.9% gain).
* The average real income of households with salaried workers posted the eighth straight year-on-year drop, down 7.5% in May (down 4.0% in nominal terms) after falling 1.4% (up a nominal 2.6%) in April and a real 4.5% and a nominal 0.9% in March. The main bread-earner’s real income in the average household marked the fifth straight year-over-year drop while the average spouse real income posted the first drop in 16 months, both partly due to shorter overtime working hours.
Real Wages Dip but at Slower Pace; Nominal Base Wages Post Solid Gain
The pickup in nominal wages in Japan continued while real wages fell on the year for the 14th straight month, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 17th straight year-on-year rise, up a preliminary 2.5% in May, after rising 0.8% (revised down from 1.0%) in April and 1.3% in March. It reflects large wage hikes at many industries for fiscal 2023 that began in April as they try to secure enough workers.
In real terms, average wages fell a preliminary 1.2% on year through May after slumping
3.2% (revised down from a 3.0% drop), 2.3% through March, 2.9% through February and 4.1% through January. 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 through May after rising 4.1% through April.
Base wages rose a solid 1.8% on year, marking the 19th straight gain, after rising 0.9% in April. The key indicator for overall wages has been on a recovery trend.
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Contact this reporter: max@macenews.com
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