–Households Seeking Savings by Switching to Low-Cost Mobile Phone Plans
–Eating Out Continues Growing, Vehicle Purchases, Car Services Rebound
–Real Household Income Posts 15th Straight Y/Y Drop on Elevated Costs
By Max Sato
(MaceNews) – Japan’s real household spending posted its 10th straight drop on the year in December, down a deeper-than-expected 2.5%, following a 2.9% dip in November, as consumers remained selective in purchases amid high costs for daily necessities and after a cold snap triggered rush purchases of winter clothing and heaters in the previous month, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
On the month, expenditures fell a worse-than-expected 0.9% for the third drop in a row for a third consecutive decline, after slumping by 1.0% in November, which was also weaker than forecast.
People continued eating out in the absence of strict Covid rules and spending on vehicles and pre-holiday car maintenance rose after a pullback in November. The start of the flu season pushed up spending on medical services including hospitalization. But these factors were not strong enough to offset the impact of the widespread move among consumers to switch to discount mobile phone plans and the pandemic-era necessity to simplify weddings and funerals.
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 December after falling 2.9% in November. It was weaker than the median economist forecast of a 2.1% fall (forecasts ranged from 4.3% to 1.4% drops). Funeral costs continued falling and demand for heaters was weaker amid higher temperatures compared to a year earlier. People had also made large tax-saving donations to municipalities outside their residence in September, leading to a decline in donations overall. The decrease was also due to lower spending on postage for New Year’s cards in a growing shift toward sending seasonal greetings by social media, as seen in November.
* For the whole of 2023, real average household spending fell 2.6% on the year, marking the first annual drop in three years after increases of 1.2% in 2022, 0.7% in 2021 and a 5.3% drop in 2020. 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 even though markups by suppliers have peaked.
* The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, slumped 3.4% on the year in December, larger than the 2.5% drop in overall spending, after falling 0.9% in November (down 2.9% overall). November’s overall drop was largely caused by lower spending on home maintenance and repairs as well as vehicles, all volatile items.
* Core expenditures rebounded a modest 0.6% on quarter in October-December quarter for the first rise in four quarters after decreases of 0.8% in July-September, 2.4% in April-June and 0.4% in January-March and a 0.7% gain in October-December 2022, indicating that private consumption is likely to provide only a limited positive contribution to total domestic output in the preliminary third quarter GDP data due on Feb. 15. Economists expect the fourth quarter GDP to post modest growth after marking its first contraction in four quarters in the previous three-month period.
* Compared to the previous month, real average household spending fell a seasonally adjusted 0.9% in December after falling 1.0% in November and 0.1% in October and rising 0.3% in September. The latest figure was weaker than the consensus forecast of a 0.3% fall (forecasts ranged from a 2.8% drop to a 0.7% gain).
* The average real income of households with salaried workers posted the 15th straight year-over-year drop, down 7.2% in December (down 4.4 in nominal terms) after falling 4.7% in November (down a nominal 1.6%). The main bread-earner’s real income in the average household marked the 12th straight year-over-year drop while the average spouse real income posted the eighth straight drop after recording the first decline in 16 months in May 2023.
Real Wage Drop Continues; Nominal Base Wages Post Solid Gain
The pickup in nominal wages in Japan continued for two years in December while real wages fell on the year for the 21st 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 24th straight year-on-year rise, up a preliminary 1.0% in December, after rising 0.7% (revised up from 0.2%) in November, 1.5% in October and 0.6% in September. The recent slower pace was due to a decline in bonuses and other special pay November and September.
Base wages rose a solid 1.6% on year, marking the 26th straight gain, after rising a revised 1.0% in November. The pace of increase accelerated from 0.5% in March to 0.9% in April and then to 1.7% in May as many firms raised wages to secure workers at the start of fiscal 2023. The key indicator for overall wages has been on a recovery trend.
In real terms, average wages fell a preliminary 1.9% on year in November for the 21st consecutive drop after falling 2.5% (revised up from a 3.0% decline) in November. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners’ equivalent rent, which rose 3.0% on year in December after rising 3.3% in November.
Consumer inflation in Japan continued easing in December in line with consensus forecasts for all three key measures as food and beverage markups had already peaked, energy prices remain on a downtrend amid slower global demand and utility subsidies, and the recent surge in hotel fees on base-year effects slowed slightly, data from the Ministry of Internal Affairs and Communication released last month showed.