–Spending on Ceremonies Down; Move to Discount Mobile Phone Plans Continues
–Traveling, Eating Out Remain Strong in Absence of Covid Restrictions
–Real Household Income Posts 11th Straight Y/Y Drop on Elevated Costs Despite Nominal Wage Hikes
By Max Sato
(MaceNews) – Japan’s real household spending posted its sixth straight drop on the year in August as high costs have prompted more selective consumption patterns, with many switching to discount mobile phone plans, holding simpler ceremonies and cutting after-school tutoring, data released Friday by the Ministry of Internal Affairs and Communications showed.
But the decline came in smaller than expected as the first summer holiday season in four years without Covid public health restrictions helped further boost pent-up demand for travel and eating out.
On the month, high demand for summer clothing and other seasonal goods amid the lingering heat wave seems to have triggered a stronger-than-expected rebound in expenditures but it is also in reaction to an unexpected slump in July.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people fell 2.5% on the year in August after falling 5.0% in July, 4.2% in June, 4.0% in May, 4.4% in April, 1.9% in March and rebounding 1.6% in February on a 0.3% dip in January. It was stronger than the median economist forecast of a 4.5% fall (forecasts ranged from 5.8% to 2.7% drops). The decrease was the ninth in 12 months.
* The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, fell 3.2% on the year in August, compared to the 2.5% drop in overall spending, after falling 3.1% in July (down 5.0% overall).
* Households have reduced spending on weddings, funerals and other ceremonies as they have simplified the procedures to avoid close contact during the pandemic. The decline in overall spending is also due to the widespread move to switch to discount mobile phone plans and cancel land line telephone contracts. Households have also trimmed spending on after-school education support for high school students and young children as elevated costs for daily necessities have eroded their purchasing power.
* Spending on healthcare services and equipment (face masks and fever thermometers) marked the fourth straight year-over-year drop as the government widely eased Covid restrictions in May and many people had already received dental treatment in April ahead of the official announcement on downgrading the threat of the pandemic.
* Many households continued spending less on groceries and prepared food, compared to the earlier phase of the pandemic, when they had cooked more at home and bought takeout food to avoid close contact. They are also being frugal as food costs remain high.
* On the upside, households continued spending more on eating out, train fees and airfares as well as overseas and domestic package tours amid eased Covid restrictions.
* Compared to the previous month, real average household spending jumped a seasonally adjusted 3.9% in August after unexpectedly plunging 2.7% in July, rebounding a modest 0.9% in June and following four months of decline. The increase was the fifth in 12 months. The latest figure was much stronger than the consensus forecast of a 0.6% rise (forecasts ranged from a 0.7 drop to a 2.5% gain). “The increase in August was largely in payback for the decline in July, so we have to discount that factor,” a Cabinet Office official told Mace News, adding that household spending patterns have not changed much.
* The real spending adjusted index (2020 = 100) stood at a five-month high of 99.8 in August, up from 96.1 in July, 98.9 in June and 97.9 in May. The index had drifted 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 July figure was the lowest under the current statistical formula dating to January 2020.
* The average real income of households with salaried workers posted the 11th straight year-over-year drop, down 6.9% in August (down 3.5% in nominal terms) after falling 6.6% (down a nominal 3.0%) in July. The main bread-earner’s real income in the average household marked the eighth straight year-over-year drop while the average spouse real income posted the fourth 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 for nearly two years while real wages fell on the year for the 17th 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 20th straight year-on-year rise, up a preliminary 1.1% in August, after rising 1.1% (revised down from 1.3%) in July, 2.3% in June, 2.9% in May and a modest 0.8% in April. The recent slower pace was due to a decline in bonuses and other special pay in August and no growth in overtime pay in July.
Base wages rose a solid 1.6% on year, marking the 22nd straight gain, after rising 1.4% in July. The pace of increase has accelerated in recent months as many firms are raising wages to secure workers. The key indicator for overall wages has been on a recovery trend.
In real terms, average wages fell a preliminary 2.5% on year in August for the 17th consecutive drop after slumping 2.7% (revised down from 2.5%) in July, 1.6% in June, 0.9% 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 3.7% on year in August after rising 3.9% in July.