–Real Household Income Posts 19th Straight Y/Y Drop but Decline Has Eased amid Widespread Wage Hikes
By Max Sato
(MaceNews) – Japan’s real household spending posted the first year-over-year increase in 14 months, up a modest 0.5% on year in April, as expected, after falling 1.2% in March, led by higher school tuition fees and the costs for studying away from home as well as more gift money given at weddings and funerals, data released Friday by the Ministry of Internal Affairs and Communications showed.
Some private universities and high schools resumed normal tuition charges in the fiscal year that began on April 1 after offering discounts and allowing late payments during the pandemic. As Covid restrictions have been lifted, more students are choosing to rent a place closer to their schools, pushing up education costs for their parents.
“Gift money is a volatile category but as things are returning to normal, people appear to be sparing more money at ceremonies, which also may be recovering after being simplified during the pandemic,” a ministry official told Mace News.
“Overall spending showed the first increase in 14 months, but it was only up 0.5%, so it is hard to call it a recovery yet,” the official said. “We need to see how things will evolve.”
Vehicle purchases fell in April as the impact of suspended production at Toyota group firms over a safety test scandal continued even though output and shipments resumed in March. The weak yen is also discouraging people from buying overseas package tours while demand for domestic tours has waned after subsidies for hotels and transportation aimed at supporting the tourism industry was phased out. People shed spending on fresh vegetables due to high prices.
On the month, real average expenditures by households with two or more people slumped a seasonally adjusted 1.2% for the first decline in three months, giving up the 1.2% increase in March. It was much weaker than the median forecast of a slight 0.1% rise (forecasts ranged from a 0.9% drop to a 0.3% gain).
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, was unchanged on the year in April after dropping 2.0% in March. The underlying trend remains: Consumers are seeking lower prices for goods and services including a wide range of discount mobile phone communications plans.
The average real income of households with salaried workers posted the 19th straight year-over-year drop, down 0.6%, but income was up 2.3% in nominal terms, following a slight 0.1% drop in March (up a nominal 3.0%). A higher pace of wage hikes among large corporations appears to be spreading to some smaller firms amid tight labor conditions.
The main bread-earner’s real income in the average household marked the 16th straight year-over-year drop, down 0.3% (up a nominal 2.6%), while the average spouse real income was up 6.0% (up a nominal 9.1%) for the third increase in a row after marking the first rise in 10 months in February.
Nominal Base Wages Post Solid Gain but Real Wages Remain Depressed
The gradual pickup in nominal wages in Japan continued for more than two years in April while real wages fell on the year for two years, data released Wednesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 28th straight year-on-year rise, up a preliminary 2.1% in April, accelerating sharply from a 1.0% rise in March and posting the largest gain since 2.3% in June 2023. The increase was led by higher base wage growth and a slight gain in special pay after two months of decline.
The pace of increase slowed in March from 1.4% in February partly due to a sharp 2.6% drop on year in total hours worked compared to a 0.9% rise in March 2023. Special one-time pay also fell 5.8% in March from a year earlier, when it jumped 11.6%.
Base wages rose 2.3 on year, marking the 30th straight gain, after rising a revised 1.7% in March. Firms are raising wages to secure workers amid widespread labor shortages.
In real terms, however, average wages fell a preliminary 0.7% on year for the 25th consecutive drop after falling 2.1% (revised up from a 2.5% decline) in the previous month. It was the smallest decrease since the 0.6% drop in December 2022. To calculate real wages, the ministry uses the overall consumer price index minus the historically subdued owners’ equivalent rent, which rose 2.9% on year in April after rising 3.1% in March.