Japan Household Spending:

 https://mainichi.jp/english/articles/20201106/p2g/00m/0bu/041000c

Article:

TOKYO (Kyodo) -- Japan's household spending tumbled a real 10.2 percent in September from a year earlier, due mainly to a last-minute surge in demand the previous year ahead of a consumption tax hike, government data showed Friday.

The monthly drop was the sharpest since the 16.2 percent plunge logged in May, the largest decrease since comparable data became available in January 2001. The fall is attributed to a nationwide state of emergency, then in effect over the coronavirus pandemic, according to the Ministry of Internal Affairs and Communications.

Ideas and Commentary:

I went to Yokohama in September 2019, as it was the Korean Thanksgiving holiday period. I arrive via Kimpo to Haneda, like I always do. I remember distinctly all of the sales campaigns that were taking place to get consumers to spend before the increased sales tax took affect in October.

I also remember it was during the 2019 Rugby World Cup and all of Japan seemed to be focused on the Rugby World Cup and spending like crazy before the increased sales tax in October.

Of course many of the sales campaigns, unfortunately were taking advantage of consumer worries about having to pay extra for whatever.

Of course there was also the typhoon around the same time that has caused major challenges to the Japanese economy during that same time.

The mood and atmosphere was almost like a feeding frenzy as people/consumers were out and about shopping/buying going to restaurants etc. 

The government for months had been advising citizens about the sales tax increase and there were different schemes or plans related to the sales tax regarding just where the 8% to 10% increase would be used, as some businesses were not as affected by the increase as others.

The government obviously tried to soften the affect after the across the board 5% to 8% increase in 2014 when in Q2 the economy took a huge decrease in consumer spending as consumers spent a lot in Q1 to avoid the sales tax increase.

And later there were articles and TV programs talking about consumers and how they were too worried and bought too much and why they did it. For example I remember one news story about a Japanese man who bought a lot of tissue paper and wondered why he it did. Kind of like now in the pandemic situation.

Article:

In the reporting month, spending by households with two or more people in real terms fell for the 12th straight month to 269,863 yen ($2,600). It saw a 9.5 percent year-on-year increase in September 2019, the fastest pace on record, ahead of a consumption tax hike from 8 percent to 10 percent starting Oct. 1 that year.

The seasonally adjusted figure for spending, meanwhile, climbed 3.8 percent from August, up for the second consecutive month following a 1.7 percent rise in the previous month.

Ideas and Commentary:

Consumer spending has always been a major concern for the Bank of Japan. As such about 5 years or so ago they attempted a strategy to try to get inflation up to the 2% level. The 2% level is a modest percent that many central banks use as a way to show balance in an economy. They figure that 2% shows there is enough economic activity taking place in the economy. 

An economy needs to have a certain amount or flow movement of money/transactions through it. It can be always savings but at the same time it can't be overheated or too much inflation, as in the case of Argentina and Venezuela recently and in China sometime back. 

So most central banks settle on 2% as a good balance of increase in demand, a good flow of money/transactions, and increases in overall prices in the an economy.

Article:

Household spending is a key gauge of private consumption and accounts for over half of Japan's gross domestic product, which contracted an annualized real 28.1 percent in the April-June quarter due to the government's emergency declaration from early April through late May.

The average monthly income of salaried households with at least two people rose a real 2.6 percent to 469,235 yen.

Income rose for the ninth month in a row, helped in part by the government's 100,000 yen cash handouts for all households decided upon in April to cushion the economic fallout from the pandemic.

Ideas and Commentary:

Yes consumer spending is around 50% of GDP. The BOJ is always concerned that its never at its full potential or Japanese consumers spending at a level that can help the economy grow.

Part of that of course is Japan is an ageing society. Japan and South Korea are 1 and 2, meaning they are the fastest rate increase in ageing populations among OECD countries.

The 65+ age groups in most countries tend to spend less for many reasons. As such Japan has a major challenge related to its ageing population.

But to be fair and honest among OECD countries the 20 to 65 age groups in Japan spend as much or more than those in other OECD countries. The problem is the 65+ age groups are becoming a larger part of the population each year. 

Increase incomes are always good. But what is even more important is how families and consumers feel. Is the increased incomes enough or do they have enough for extra income spending instead of just worrying about expenses, their jobs, and their future. Is the extra income enough to get out and about shopping and or shopping on the Internet these days. 

For years the Japanese government and the BOJ have been trying to get large companies, who have large sums of cash on hand to use the extra cash they have and increase salaries of their employees. The idea of course, is consumers have increases in their salaries, and they feel good about it, they might use some of that extra income to to spend.

The BOJ even instituted a negative interest rate policy, not aimed at families but big businesses. A "use it or lose it" strategy to get big businesses to use the extra cash they have and increase the salaries of their employees.

This was also part of the strategy to increase inflation to 2% as more consumers spend there will be more demand in the economy with the idea of more spending and more demand an increase in overall prices in the economy meaning an increase of inflation.

The strategy hasn't exactly worked as inflation is still stuck around 1%. 

That is another story for later.