–Govt Official: Household Spending Recovering Despite M/M Drop; Still Below Pre-Pandemic Level
–Spending on Hotels, Package Tours Continues Rising on Tourism Support Program
–February’s Y/Y Rise Led Also by Higher Electric Heating Use during Freezing Weather in Late January
–Real Household Income Posts 5th Straight Y/Y Drop on High Costs for Food and Despite Energy Subsidies
By Max Sato
(MaceNews) – Japan’s real household spending posted a modest rebound on the year for the first rise in four months in February as the economy continues to reopen without strict public health rules, but the increase was partly offset by the widespread move to switch to discount mobile phone plans, data released Friday by the Ministry of Internal Affairs and Communications showed.
Households slashed spending on the month, giving up most of a hefty gain made in January, as many consumers have been hit by continued markups in daily necessities and falling real wages.
Other data have shown that consumer confidence picked up sharply in February as the economy continued reopening and anti-Covid public health rules were scheduled to be eased further in March.
Both the government and the Bank of Japan have been providing stimulus to help the economy recover fully from the pandemic-caused slump. The output gap has remained negative while wage growth has been slow.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people rebounded 1.6% on the year in February for the first rise in four months after falling 0.3% in January and coming in much weaker the median economist forecast of a 4.8% rise (forecasts ranged from 1.3% to 5.4% gains). It was the sixth increase in 12 months. November’s 1.2% drop was the first in six months following a 1.2% rise in October.
* The real spending adjusted index (2020 = 100) stood at 101.1 in February after rising to 103.6 in January for the highest point since 104.9 in April 2021, but it is still just above 100.9 seen in December. “Our assessment is that household spending has been recovering from the 2020 level despite the decline on the month in February,” a ministry official told Mace News. “But it is still below the pre-pandemic level, down 4.4% from February 2019.”
* The increase in February was led by higher electricity bills, which reflected the need to use more heating during the freezing weather in late January. Some electricity meter readings were conducted in January before the government’s expanded energy subsidies took effect, the official said.
* As seen in recent months, households also spent more on eating out, hotels and domestic travel packages, compared to a year earlier, when the government urged restaurants and bars to cut business hours and people to stay home during the Omicron storm. In 2022, the government resumed restrictions on social and economic activities in 35 of the 47 prefectures in late January and extended strict Covid rules for Tokyo and 17 other jurisdictions until March 21.
* The year-on-year increase was partly offset by the move among many mobile phone users to switch to discount plans. There is also a shift toward shopping at physical stores from ordering goods online, which resulted in lower spending on home delivery costs in February, the official said. Households continued spending less on groceries (fish) and prepared food (bento boxes), compared to the earlier phase of the pandemic, when households had cooked more at home and bought takeout food to avoid contact.
* On the month, real average household spending slumped a seasonally adjusted 2.4% in February after jumping 2.7% in January, falling 1.4% in December and 0.4% in November and rising 0.7% in October. It was the sixth decrease in 12 months and sharper than the consensus forecast of a 0.5% slip (economist forecasts ranged from a 2.1% dip to a 1.3% rise).
* The average real income of households with salaried workers posted the fifth straight year-on-year drop, down 0.8% in February (up 3.1% in nominal terms), after falling 1.7% (up a nominal 3.3%) in January. The main bread-earner’s real income in the average household marked the second straight year-over-year drop while the average spouse real income posted the 13th straight rise.
Real Wages Slump; Gradual Pickup in Nominal Base Wages Intact
The gradual pickup in nominal wages in Japan continued while real wages recorded the 11th straight year-on-year drop, data released Friday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 14th straight year-on-year rise, up a preliminary 1.1% in February, after rising 0.8% and surging 4.1% in December, which was led by winter bonus payments that were concentrated at the end of the year.
In real terms, average wages fell a preliminary 2.6% on year after slumping 4.1% in January and edging down 0.6% in December. To calculate real wages, the ministry uses the overall consumer price index minus owners’ equivalent rent, which rose 3.9% on year in February after surging 5.1% in January. It was above the 3.1% annual rate in the core CPI (excluding fresh food) for the month.
Base wages rose 1.1% on year, marking the 16th straight gain after rising a revised 0.9% in January and 1.4% in December. The key indicator for overall wages has been on a modest recovery trend this year.