By Max Sato
(MaceNews) – Japan’s household spending was lackluster in July, posting a weaker-than-expected rise from a year earlier and marking the third straight month-on-month decline, as restrictions on economic activity lingered, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
The government is not imposing lockdowns in its efforts to stop the pandemic from spreading as it is also seeking to support economic growth. Some people, tired of restrictions, took a chance and went out for dining and shopping more often, before a resurgence in coronavirus cases hit many regions in August.
July’s year-on-year increase followed a slump in June, which was in reaction to active purchases of appliances a year earlier spurred by COVID-19 cash handouts.
Despite weak spending on face-to-face services, expenditures on some goods continued growing, leading to unexpectedly resilient private consumption in the April-June GDP data released last month.
However, consumer spending may not recover as fast as Japanese policymakers wish to see. The government has been criticized for its slow and inconsistent response to the pandemic. Prime Minister Yoshihide Suga announced last week he would withdraw from the ruling party leadership race, effectively stepping down after only a year in office.
The key points from the monthly Family Income and Expenditure Survey on Households:
* Real average spending by households with two or more people edged up 0.7% on year, after slumping 4.3% in June (revised up from -5.1%) and surging 12.5% (also revised up from +11.6%) in May. The year-on-year gain also reflected a 7.6% slump seen in July 2020. The key indicator of consumption came in much weaker than the median economist forecast of a 2.9% rise.
* The year-on-year increase in July was led by higher spending on takeout food, admissions to theaters for movies and plays, hotel fees, and train and air fares. By contrast, households spent less on home appliances (refrigerators and washing machines), personal hygiene goods and eyeglasses.
* On the month, real average household spending dipped a seasonally adjusted 0.9%, marking the third consecutive decline after falling 3.1% (revised from -3.2%) in June and slipping 2.3% (revised from -2.1%) in May. The pace of increase was slower than the median economist forecast of a 1.1% gain.
* The ministry revised household spending data for the first six months of 2021 for real year-on-year changes and all of month-on-month figures to match large-scale revisions to the CPI statistics formula that takes place every five years. The government has shifted the base year to 2020 from 2015 and updated the CPI basket of goods and services in a routine move to correct the statistics’ upward bias and reflect the latest lifestyles.
* The average real income of households with salaried workers fell 2.2% on year in July, posting the third straight y/y drop after slumping 10.8% (revised up from
a 11.5% fall) in June. The recent weakness was caused by a plunge in “special income,” compared to May and June 2020, when many individuals received a one-time cash handout worth Y100,000 (about $910) from the government as part of its stimulus measure to ease the pain of the first wave of the global pandemic.
* The main bread-earner’s income in the average household marked the fourth consecutive gain on year in July, up 7.9%. The average spouse income also rose for the fourth month in a row, up 5.7%.
Wage Growth Picks Up in July
The pickup in wages resumed in July after flat results in June, thanks to a modest but steady gain in base wages, preliminary data released Tuesday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan rose 1.0% on year in July after inching up 0.1% (revised from a 0.1% drop) in June. It was the fifth straight year-on-year gain, recovering gradually from a pandemic-triggered slump in 2020, when nominal wages dipped 1.2% vs. -0.4% in 2019.
In real terms, average wages climbed 0.7% in July after slipping 0.1% in June and rising 2.0% in May.
Base wages gained 0.4% on year in July, the seventh straight gain, after gaining 0.2% in June. The key indicator for overall wages has been on a modest recovery trend.