–Consumers Remain Frugal, Switching to Discount Mobile Phone Plans
–High Wage Hikes amid Labor Shortages Lead to 2nd Straight Rise in Average Household Income
–Base Wages Mark Highest Growth in Nearly 3 Decades; Real Wages Up for 1st Time in 27 Months
By Max Sato
(MaceNews) – Japan’s real household spending posted its second straight year-over-year drop in June, down 1.4%, but excluding volatile factors like home maintenance and car purchases, the core reading marked its first increase in 16 months, up 1.3%, as the killer heat wave boosted demand for air conditioners and refrigerators, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
An unusually late start to the rainy season in many regions also propped up demand for beverages, snacks, eating out and summer clothing. The rare rise in the core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, followed a 3.4% dip in May and no growth in April.
The overall spending drop was larger than the median forecast of a 1.0% fall and followed an unexpected 1.8% slump in May and a 0.5% gain, which was the first rise in 14 months.
“The three-month moving average continued to fall in June,” a Cabinet Office official told Mace News. “The pace of decline has slowed in recent months and we can see a flat trend but it is too early to say household spending is recovering.”
The decrease in June was led by lower spending on home maintenance and repairs, which fluctuate from month to month, but it was also due to the widespread move among cell phone users to discount plans. There were signs that many households tried to save energy in May when the government halved subsidies for electricity and natural gas, resulting in lower bills paid in June.
Amid elevated costs, households have also trimmed discretionary spending, such as on hotels and transportation. They are also being crowded out by an influx of tourists from other countries who have higher purchasing power as the yen continued to slide until recently.
Real household spending fell 0.9% on year in the April-June quarter, with the pace of decline slowing from a 2.7% drop seen in January-March.
Compared to the previous month, real average expenditures by households with two or more people edged up a seasonally adjusted 0.1% for the first rise in three months, after dipping 0.3% in May and slumping 1.2% in April. It was weaker than the median forecast of a 0.3% rise and came at the bottom of the forecasts that ranged from 0.1% to 1.0% gains.
Japan’s gross domestic product for the April-June quarter (data due on Aug. 15) is forecast to post a modest 0.6% rebound on quarter, or an annualized 2.3%, after suffering its first contraction in two quarters in January-March with a 0.7 percent drop (annualized 2.9 percent). Consumption and business investment is expected to have picked up after having been hit by suspended output at Toyota group factories over a safety test scandal. Public works spending is also seen rebounding after a sharp drop.
In another positive development, the average real income of households with salaried workers rose 3.1% in June after marking the first year-over-year increase in 20 months in May, up 3.0%, and falling 0.6% in April. In nominal terms, average income grew a solid 6.5% following increases of 6.4% in May and 2.3% in April.
The main bread-earner’s real income in the average household also recorded the second straight increase in June, up 3.6% (up a nominal 7.0%), thanks to wage hikes at major firms amid tight labor conditions. It marked the first year-over-year rise in 17 months in May with a 2.0% gain (up a nominal 5.4%) in May after falling 0.3% (up a nominal 2.6%) in April. The average spouse real income was up 6.3% (up a nominal 9.8%) for the fourth increase in a row, following an 8.6% gain (up a nominal 12.2%) the previous month.
Nominal Base Wages Post Highest Rise in Nearly 3 Decades; Real Wages Up
Nominal wages jumped on the year in June while real wages marked their first gain in more than two years, data released Tuesday by the Ministry of Health, Labour and Welfare showed, partly supporting the move by the Bank of Japan to raise the target for the overnight interest rate to 0.25% from a range of zero to 0.1% at the end of July.
Total monthly average cash earnings per regular employee in Japan posted their 30th straight year-on-year rise, up 4.5% in June, accelerating further from increases of 2.0% in May and 1.6% in April. The increase was led by higher base wage growth and a rise in special pay.
Base wages rose 2.3% on year in June, marking the 32nd straight gain and the highest growth in nearly three decades, after rising 2.1% in May and 1.8% in April.
In real terms, average wages rose 1.1% on year, marking the first rise in 27 months, after falling 1.3% the previous month. To calculate real wages, the ministry uses the overall consumer price index minus the historically subdued owners’ equivalent rent, which rose 3.3% on year in June after rising at the same pace in May.