–Drop Also Due to Continued Shift to Lower-Cost Mobile Phone Plans; Traveling, Eating Out Remain Strong
–Real Household Income Posts 9th Straight Y/Y Drop on Elevated Costs
By Max Sato
(MaceNews) – Japan’s real household spending posted its fourth straight decline on the year in June as mobile phone users continued seeking discount plans and consumers were generally frugal amid high costs for daily necessities, but expenditures marked a modest monthly gain after four months of decline, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Many households remain selective, spending more on traveling and eating out. Some also spent more on motor vehicles, a volatile item, as eased semiconductor shortages and improved supply chains led to faster deliveries.
Spending slumped in the April-June quarter from January-March, indicating private consumption was weak in the preliminary GDP data for the second quarter due on Aug. 15.
Key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people fell 4.2% on the year in June after falling 4.0% in May, 4.4% in April, 1.9% in March and rebounding 1.6% in February after a 0.3% dip in January. It was slightly firmer than the median economist forecast of a 4.5% fall (forecasts ranged from 5.5% to 1.9% drops). The decrease was the seventh in 12 months.
* The decline was led by lower spending on durable goods including air conditioners and washers as many households had already bought those appliances a year earlier when they stayed more at home to avoid Covid infections. The overall decrease was also due to the widespread move among mobile phone users to switch to discount plans.
* On the upside, households spent more on autos and auto parts, thanks to improving supply chains, and overseas and domestic package tours amid eased Covid restrictions.
* In a technical development, spending on electricity fell a nominal 7.2% on the year as utility prices were lowered by subsidies and a cut in the renewal energy promotion surcharge on electricity bills, but it rose 5.9% in real terms as the cost for electricity fell a sharp 12.4% on the year in the June CPI data, pushing up the purchasing power for this item.
* 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.
* On the month, real average household spending rose a seasonally adjusted 0.9% in June after decreases of 1.1% in May, 1.3% in April, 0.8% in March, 2.4% in February and a 2.7% rise in January. The increase was the fourth in 12 months. The latest figure was stronger than the consensus forecast of a 0.2% rise (forecasts ranged from a 0.6 drop to a 3.1% gain).
* The real spending adjusted index (2020 = 100) stood at 98.9 in June, up from 97.9 in May (the lowest since 96.2 in August 2021), but down 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).
* The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, shrank 2.4% on quarter in April-June for the second straight drop after slipping 0.4% in January-March and rising 0.7% in October-December, indicating that private consumption might have provided a negative contribution to second quarter growth in the preliminary GDP data.
* Japan’s economy is forecast by economists to post a solid 0.9% increase on quarter, or an annualized 3.3% rise, in April-June, led by net exports as a result of a sharp drop in imports, while consumer spending and business investment appear to have taken a breather. It would follow 0.7% growth on quarter, or an annualized 2.7% increase, in the first quarter of 2023, when an unexpected surge in private-sector inventories topped resilient consumer spending as the largest factor to lead the growth.
* The average real income of households with salaried workers posted the ninth straight year-over-year drop, down 5.6% in June (down 1.9% in nominal terms) after falling 4.0% (down a nominal 0.4%) in May and slipping 1.4% (up a nominal 2.6%) in April. The main bread-earner’s real income in the average household marked the sixth straight year-over-year drop while the average spouse real income posted the second straight drop after recording the first decline in 16 months in May.
Real Wage Drop Continues; Nominal Base Wages Post Solid Gain
The pickup in nominal wages in Japan continued while real wages fell on the year for the 15th 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 18th straight year-on-year rise, up a preliminary 2.3% in June, after rising 2.9% (revised up from 2.5%) in May and a modest 0.8% in April. It reflects large wage hikes at many industries in fiscal 2023 that began in April as they try to secure workers. Base wages rose a solid 1.4% on year, marking the 20th straight gain, after rising 1.7% in May. The key indicator for overall wages has been on a recovery trend.
In real terms, average wages fell a preliminary 1.6% on year in June after falling 0.9% (revised up from a 1.2% drop) in May and 3.2% in April. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners’ equivalent rent, which rose 3.9% on year in June after rising 3.8% in May.