By Max Sato
(MaceNews) – Japan’s household spending posted the first year-on-year rise in four months in March, partly in reaction to the slump seen a year earlier, when the first wave of the pandemic hit the world, prompting people to reduce traveling and eating out, data released Tuesday by the Ministry of Internal Affairs and Communications showed.
However, spending fell in the January-March period both on year and quarter, indicating the economy contracted in Q1 for the first time in three quarters given private consumption accounts for nearly 60% of the gross domestic product.
Spending on some services picked up slightly in March as the government gradually lifted restrictions on economic activity amid fears that doing so would trigger a resurgence of coronavirus cases. In early March, the government extended its request for restrictions in Tokyo and three surrounding prefectures until March 21, while lifting emergency measures for six other jurisdictions.
In April, the government resumed its call for stricter social-distancing and stay-home practices in major commercial hubs, being forced to declare a “state of emergency” again for Tokyo as well as western prefectures of Osaka, Kyoto and Hyogo, only a month after it lifted such measures for Tokyo and its neighbouring jurisdictions. The latest action prompted prefectural governors to ask shops, restaurants, bars and event venues to close during the emergency period.
In the near term, spending on traveling and eating out is likely to be limited as the state of emergency is in effect for about three weeks through mid-May.
The key points from the monthly Family Income and Expenditure Survey on
Households:
* Real average spending by households with two or more people rebounded 6.2% on year in March after slumping 6.6% in February, marking first y/y gain in four months. The key indicator of consumption came in stronger than the median economist forecast of a 1.1% rise. The sharp drop in February 2021 was partly due to higher-than-usual spending in February 2020, which was pushed up by the leap-year effect.
* From a year earlier, spending in the January-March quarter dipped a real 2.0%, the first y/y drop in two quarters after rising 0.7% in the final quarter of 2020.
* “Household spending in March rose partly due to the low level of spending seen a year before and also because the economy gradually reopened, but amid rising coronavirus cases, the situation needs a close watch,” a ministry official said.
* The increase was led by higher spending on durable goods including TVs and personal computers as many people continued adopting stay-home lifestyles. Spending on accommodations was also up, compared to March 2020, when people avoided traveling. Spending on mobile communications rose due to calendar factors (February bill payments were carried over into March as the last day of February fell on a Sunday).
* Expenditures on food (rice and meat) and daily necessities (toilet paper and hand sanitizers) fell from March 2020, when many households hoarded essential items on rumours that the country was running out of supplies during the pandemic.
* On the month, real average household spending also jumped a seasonally adjusted 7.2% in March after rising 2.4% in February and plunging 7.3% in January.
* In the first quarter, spending slumped a real 3.9% on quarter, posting the first q/q drop in three quarters after rising 4.1% in October-December. This indicates that weak private consumption led to a contraction in Q1 GDP due on May 18.
* The average real income of households with salaried workers fell 1.0% on year in March, marking the first y/y drop in two months after edging up 0.1% in February. The recent trend showed a continued decline in main bread-earner’s income in the average household that began at the peak of the initial wave of the pandemic in May 2020. In March, the average spouse income also slumped for the second month in a row after marking the first y/y decline in 17 months in February.