–Trend Among Cell Phone Users to Switch to Discount Plans Also Continues
–Vehicle Purchases Up; Higher Gift Money Given at Post-Covid Ceremonies
–Real Household Income Posts 1st Y/Y Rise in 20 Months on Higher Wage Hikes, also due to Jump in Regular Pay vs. Weak May 2023
By Max Sato
(MaceNews) – Japan’s real household spending unexpectedly slumped 1.8% on the year in May, well below the consensus call of a 0.2% rise, as consumers slashed purchases of fresh vegetables whose prices had soared on bad weather while the weaker yen discouraged many people from booking overseas package tours, data released Friday by the Ministry of Internal Affairs and Communications showed.
The decrease, which followed a 0.5% rise in April for the first gain in 14 months, was also due to lower electricity bills paid in May after the northern region had mild weather in April. The widespread move among cell phone users to switch to discount plans also continued. Lower spending on mobile communications was also in reaction to unusually high May 2023 bills which included some payments that were carried over from the previous month.
Households have also trimmed discretionary spending in recent months. Demand for domestic hotel stays have already waned after subsidies for hotels and transportation aimed at supporting the tourism industry were phased out late last year.
Real household spending appears to be on a gradual pickup trend after plunging 6.3% in January but a ministry official told Mace News, “We cannot call it stronger but we wouldn’t particularly call it weak, either. We need to see more data to have a clearer assessment.”
On the upside, households spent more on new passenger cars and second-hand vehicles, the latter of which is gaining more traction among frugal consumers. Resumed production and shipments at Toyota group firms in March led to smoother deliveries of vehicles, but sales data have shown a decline in small vehicles, which are the main models impacted by two months of output suspension over safety issues, the ministry official noted.
Households also spent more on dental and medical bills (dental fees have risen; Covid treatment is not covered by public healthcare plans any longer) and gave more gift money at weddings and other ceremonies as the economy entered a post-Covid phase.
The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, fell a sharper 3.4% on the year in May after being flat in April.
Compared to the previous month, real average expenditures by households with two or more people dipped a seasonally adjusted 0.3% after slumping 1.2% in April for the first decline in three months and marking a 1.2% rise in March. It was weaker than the median forecast of a 0.7% rise (forecasts ranged from 0.5% to 1.0% gains).
In a positive development, the average real income of households with salaried workers posted the first year-over-year increase in 20 months in May, up 3.0%, after falling 0.6% in April. In nominal terms, the increase was a bigger 6.4%, accelerating from a 2.3% gain in April.
“Companies are raising wages at a higher pace this year but you must also pay attention to the fact that overall income was up on a jump in regular pay in May, which was largely in reaction to an unusually low amount in May 2023,” the ministry official said.
The main bread-earner’s real income in the average household marked the first year-over-year rise in 17 months, up 2.0% (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 8.6% (up a nominal 12.2%) for the fourth increase in a row, following a 6.0% gain (up a nominal 9.1%) the previous month.
Nominal Base Wages Post Solid Gain but Real Wages Remain Depressed
The Ministry of Health, Labour and Welfare will release May wages data in its monthly labor survey on Monday. The latest data showed that the gradual pickup in nominal wages continued for more than two years in April while real wages fell on the year for two years.
Total monthly average cash earnings per regular employee in Japan posted their 28th straight year-on-year rise, up 1.6% (revised down from the initial reading of 2.1%) in April, accelerating from a 1.0% rise in March and posting the largest gain since 2.3% in June 2023. The increase was led by higher base wage growth and a solid gain in special pay after two months of decline.
The pace of increase slowed in March from 1.4% in February partly due to a sharp 2.6% drop on year in total hours worked compared to a 0.9% rise in March 2023. Special one-time pay also fell 5.8% in March from a year earlier, when it jumped 11.6%.
Base wages rose 1.8% (revised down from 2.3%) on year, marking the 30th straight gain, after rising 1.7% in March. Firms are raising wages to secure workers amid widespread labor shortages.
In real terms, however, average wages fell 1.2% (revised down from a 0.7% dip) on year for the 25th consecutive drop, with the pace of decline decelerating from a 2.1% drop the previous month. It was the smallest decrease since the 1.1% drop in January 2023. To calculate real wages, the ministry uses the overall consumer price index minus the historically subdued owners’ equivalent rent, which rose 2.9% on year in April after rising 3.1% in March.