–Real Household Income Posts 18th Straight Y/Y Drop but Improves from February on Higher Wage Hikes
By Max Sato
(MaceNews) – Japan’s real household spending fell a smaller-than-expected 1.2% on year in March after a 0.5% slip in February (down a sharper 2.7% without the leap-year effect) as consumers remain cautious amid elevated costs for food and other necessities.
The 13th straight year-over-year decrease in household spending was led by lower electricity bills paid in March for February, when mild weather reduced heating needs. Households also continued giving less gift money as Covid-era necessity has simplified ceremonies and lowered their costs. Pent-up demand for traveling has waned after subsidies for hotels and transportation aimed at supporting the tourism industry had been phased out.
On the month, real average expenditures by households with two or more people rose a seasonally adjusted 1.2%, stronger than the median forecast of being unchanged (forecasts ranged from a 3.4% slump to a 0.5% rise) following an equally solid 1.4% gain, which was the first increase in five months. Lower temperatures in the first half of March dampened demand for spring clothing but sales of formal wear for graduation and entrance ceremonies were solid.
People continued spending more on eating out, but higher spending on automobiles in March may not necessarily be a welcome sign for the outlook for consumer spending. Compared to a year earlier, the number of vehicles purchased was the same but their prices were higher. The ministry could not determine whether consumers are shifting toward higher-end models or high material costs are boosting vehicle prices. In addition, some parents had to send more money to their children studying away from home.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, fell a larger 2.0% on the year in March after dipping 0.8% in February. The underlying trend is in place: Consumers are seeking lower prices for goods and services including a wide range of discount mobile phone communications plans.
“We have to keep a close watch on the developments in inflation but judging from a smaller year-on-year decline in spending in March, we can say things have stabilized somewhat,” a ministry official told Mace News.
The average real income of households with salaried workers posted the 18th straight year-over-year drop but it was down just 0.1% in March and up 3.0% in nominal terms, improving from a 2.5% fall in February (up a nominal 0.7%), as many firms are raising wages at a faster pace to secure works amid widespread labor shortages.
The main bread-earner’s real income in the average household marked the 15th straight year-over-year drop, down 1.4% (up a nominal 1.7%), while the average spouse real income was up 3.9% (up a nominal 7.1%) for the second increase in a row after marking the first rise in 10 months in February.
Nominal Base Wages Post Solid Gain but Real Wages Remain Depressed
The gradual pickup in nominal wages in Japan continued for more than two years in March while real wages fell on the year for two years, data released Thursday by the Ministry of Health, Labour and Welfare showed.
Total monthly average cash earnings per regular employee in Japan posted their 27th straight year-on-year rise, up a preliminary 0.6% in March, after rising 1.4% (revised down from 1.8%) in February, which was raised by the leap-year effect. The pace of increase slowed in March partly due to a sharp 2.7% drop on year in working hours compared to a 0.9% rise in March 2023. Special one-time pay also fell 9.4% from a year earlier, when it jumped 11.6%.
Base wages rose 1.7% on year, marking the 29th straight gain, after rising a revised 1.7% in February. Firms are raising wages to secure workers amid widespread labor shortages. The key indicator for overall wages has been on a recovery trend.
In real terms, however, average wages fell a preliminary 2.5% on year for the 24th consecutive drop after falling 1.8% (revised down from a 1.3% decline) in the previous month. To calculate real wages, the ministry uses the overall consumer price index minus the structurally weak owners’ equivalent rent, which rose 3.1% on year in March after rising 3.3% in February.
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