–Spending on Hotels, Transport Continues Rising on Govt Tourism Support
–October-December Household Spending Rebounds, Indicating Consumption Supported Expected Q4 GDP Solid Growth
–Spending in 2022 Marks 2nd Straight Annual Rise, Showing Pickup from Pandemic Slump
–December Real Household Income Posts 3rd Straight Y/Y Drop as Inflation Bites
By Max Sato
(MaceNews) – Japan’s real household spending posted a sharper-than-expected drop on the year in December as more people subscribed to discount mobile communications plans and refrained from buying increasingly more expensive new smartphones, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
Spending also posted an unexpected second straight fall on the month despite expectations for a slight rebound led by stronger demand for winter clothing and heating oil amid freezing temperatures in December, indicating consumers were being frugal as costs for food and utilities continued to surge.
However, household expenditures showed a rebound on quarter in the October-December period, which is expected to have provided support to solid growth in the fourth-quarter gross domestic product due on Feb. 14.
In the absence of strict public health rules for the first time in three years, many households continued spending on domestic travel, using the government’s discount program launched in October, while some people were cautious about stepping out as the numbers of coronavirus infections and deaths surged.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people fell 1.3% on the year in December for the second straight drop after falling 1.2% in November, coming in much weaker than the median economist forecast of a 0.4% fall (forecasts ranged from a 1.3% drop to a 0.3% gain). It was the fifth decrease in 12 months. November’s drop was the first in six months following a 1.2% rise in October.
* The decrease in December was led by lower spending on mobile communications, which pushed down overall expenditures by 0.20 percentage point, and on mobile phones (negative 0.05-point contribution). “The number of subscriptions to discount plans that had been already in the market increased in the month,” a ministry official told Mace News. “People are also shying away from buying new models as they are becoming more expensive, and at the same time, repairing their existing phones support environmental conservation.”
* People have been spending less on groceries, particularly fish, compared to the earlier phase of the pandemic when households had cooked more at home to avoid contact. In addition, people also spent less on fish and alcohol in December as they avoided holding yearend parties in light of a fresh spike in Covid cases.
* The ministry official said there were no one-off factors behind December’s weak household expenditures. Spending unexpectedly fell on the year in November largely due to two temporary factors: Mild weather dampened demand for winter clothing, heaters and blankets; Mobile and landline phone charges dropped compared to November 2021, when bill payments were made for both October and November (the last two days of October 2021 fell on a weekend and thus charges for that month were carried over).
* On the upside, spending on hotels as well as air and land transportation continued to show year-over-year gains in December. Some people also spent more on playing golf to exercise without being in a tight indoor space during the eighth wave of the pandemic in Japan. Even compared to the pre-pandemic December 2019, spending on accommodations rose 37.7% in December 2022, up from 30.3% in November. Spending on train fares dipped 13.4% on levels seen three years earlier, although the decrease was smaller than the 14.2% drop in the prior month.
* On the month, real average household spending plunged a seasonally adjusted 2.1% in December after falling 0.9% in November and rising 1.1% in October.
It was the seventh decrease in 12 months and weaker than the consensus forecast of a 0.4% rebound (economist forecasts ranged from a 0.6% dip to a 0.8% rise). The real spending index stood at 100.3 in December, falling to just below 100.4 seen in August 2022.
* Real expenditures posted a modest 0.4% rebound on quarter in the October-December quarter after falling 1.6% in July-September and rising 2.0% in April-June, indicating that private consumption supported an expected solid economic growth of around 0.5% (annualized 2.0%) in the fourth quarter measured by the gross domestic product after a slight 0.2% contraction (annualized 0.8%) in the third quarter.
* In 2022, average spending rose 1.2% on the year, marking the second consecutive annual increase as more people dined out and traveled without strict public health rules, after rising 0.7% in 2021, slumping 5.3% in 2020, rebounding 0.9% in 2029 and slipping 0.4% in 2018.
* The average real income of households with salaried workers posted the third straight year-on-year drop, down 0.4% (up 4.4% in nominal terms) in December after falling 0.3% (up a nominal 4.2%) in November and 0.9% (up a nominal 3.5%) in October and posting its first rise in six months in September with a small 0.2% gain (up a nominal 3.7%). The annual consumer inflation rate is above 4% as more firms are passing higher costs onto consumers.
* The main bread-earner’s real income in the average household marked the first year-on-year increase in nine months led by yearend bonus payments, up 1.3% (up a nominal 6.2%) in December, after falling 2.2% (up a nominal 2.2%) in November.
* The average spouse income posted the 11th straight rise, up a real 8.5% (up a nominal 13.7%), after rising 4.6% (up a nominal 9.3%) in November. Firms tend to use non-regular workers as buffers during economic swings. As the economy reopens further, retailers, hotels and restaurants are hiring more people.
Real Wages Flat; Pickup in Nominal Base Wages Intact
The gradual pickup in nominal wages in Japan continued in December while real wages were flat after surging costs for daily necessities had caused a real drop in the previous eight months, data released Tuesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 12th straight year-on-year rise, up a preliminary 4.8% on year on winter bonuses and a higher regular pay, after rising 1.9% (revised up from 0.5%) in November, 1.4% in October and 2.2% in September.
In real terms, average wages edged up a preliminary 0.1% on year for the first gain in nine months after falling 2.5% (revised up from a 3.8% plunge), 2.9% in October and 1.2% in September.
To calculate real wages, the ministry uses the overall consumer price index minus owners’ equivalent rent, which surged 4.8% on year in December and rising 4.5% in November. It was well above the 4.0% rise in both the total CPI and core measure (excluding fresh food) for December.
Base wages rose 1.8% on year, marking the 14th straight gain after rising 1.5% in November and 1.0% in October. The key indicator for overall wages has been on a modest recovery trend this year.