Japan Oct. household spending up 1.9% after 2019 tax hike:

 https://mainichi.jp/english/articles/20201208/p2g/00m/0bu/056000c

Japan Oct. household spending up 1.9% after 2019 tax hike

Article:

TOKYO (Kyodo) -- Japan's household spending in October rose 1.9 percent from a year earlier for the first increase in 13 months, as consumption rebounded from a fall triggered by a tax hike last year and was also supported by a domestic travel subsidy program, government data showed Tuesday.

Average spending by households with two or more people in real terms was 283,508 yen ($2,700), according to the Ministry of Internal Affairs and Communications.

A ministry official said outlays for durable goods such as television sets, personal computers and refrigerators rebounded sharply after the consumption tax increase from 8 percent to 10 percent on Oct. 1 last year dented demand for such goods.

Ideas:

Consumers, either because of need or because of getting used to a higher price related to the tax, always start to spend again as is seen. 

Sometimes it takes a while for consumers to come to idea that the new price is not going down and or I need this product and there is no other choice.

Of course the travel subsidy might helped some, as an incentive to spend again.

I was in Japan a year ago last September and it felt like a spending frenzy as there were sales, promotion, and a lot of campaigns to get consumers to spend before the October 1 tax increase.

All three items; computer, refrigerators, and television sets could all be related to the virus situation as they are all used in the home.

Refrigerators for storing more food as families don't go out to eat as much. Television sets of course as families/individuals stay home more, and of course computers for working at home and or online classes.

Article:

Spending on furniture and household appliances rose 39.7 percent from the previous year, while health care expenditures climbed 15.9 percent as people bought more face masks to prevent the spread of the novel coronavirus and received their flu shots earlier than usual.

The government's "Go To Travel" subsidy program launched in late July to boost the virus-hit domestic tourism sector and "Go To Eat" campaign introduced in October to encourage dining out are also believed to have contributed to the improvement, he said.

The latest figures indicate consumption "is getting closer to pre-coronavirus levels," the official added.

Ideas:

Again household appliances and furniture might have been related to families spending more time at home and or as the tax increase was in October they finally got used to the higher prices related to the tax increase and decided to buy what they've needed for a while.

Of course the virus situation might have increased health care spending on items such as masks and flu shot.

Not to forget last spring there were shortages on some products as consumers were in a spending spree for items such paper towels, tissue paper, and other household daily need products, not to forget masks.

The idea to encourage consumers to go back to restaurants might have been a logical idea at the time, but could it have increased the virus spread in November and December.

Consumer spending might have gotten close to pre-virus levels at the time, but the increase in late November and December might actually decrease consumer spending again.

Article:

Despite signs the world's third largest economy was gradually emerging from the fallout caused by the initial wave of virus infections, a recent resurgence of new cases from November has clouded the outlook.

"As the impact of the coronavirus persists, we will continue to watch developments carefully," the official said.

Virus infections in Japan had somewhat subsided in the reporting month but November saw an expansion of the pandemic with daily new cases topping 2,500 later in the month, increasing concern over the strain on health care systems.

Ideas:

As news about an new increase in the virus situation hits the news cycle everyday it can only decrease consumer feeling or confidence which will eventually decrease consumer spending again.

And as this post is written later than the date published there are now new emergency measures in place that might decrease consumer spending even more.

As I check the YouTube channel of the Shibuya crossing there seems to be less people out and about, at least around the Shibuya crossing area.

Article:

Among other components, spending on transportation and communications slipped 3.0 percent, as people continued to refrain from using airlines and railways.

The average monthly income of salaried households with at least two people rose a real 2.5 percent to 546,786 yen, up for the 10th month in a row.

Household spending is a key gauge of private consumption and accounts for over half of Japan's gross domestic product, which grew an annualized real 22.9 percent in the July-September period from the previous quarter.

Ideas:

Because of the virus situation possibly more people are working from home and not traveling, by train/subway to their company offices as much.

And the same with domestic travel on airlines. Possibly instead of traveling by airline to Sapporo, Osaka, Fukuoka etc. business people are not using Zoom etc. for business meetings.

The increase in household income is always a good thing, as in most cases, some of the increase will be save and some will be used to spend in the economy.

For many years the Bank of Japan had been encouraging companies to increase the salaries of their employees, as companies had been sitting on a lot of extra money since the 2008 global financial crisis.

The fact that consumer spending is over half of the Japan's GPD indicates it is an important factor in the country's economic growth and can't be ignored.

As such the Bank of Japan, and for good reason, is always focused on consumer spending to increase the inflation rate in the economy.

Consumer spending for the size of the Japanese economy most likely is not at fullest potential level.

And there might be some good reasons. First is the idea that a larger part of the Japanese population is now 65+ in age. Those in that age group tend to spend less. 

Those in the 20-65 age groups are actually spending as much or more than those in other OECD countries. 

But because the 65+ age group is getting larger every year in Japan, it might indicated consumer spending in Japan could decrease every year unless the other age groups spend more.

As a result BOJ is always concerned about consumer spending decreasing.

The BOJ has focused on trying to get inflation to 2.0 percent but has failed to do so since about 2014 when it began a campaign strategy to get it to 2.0 percent.

A 2.0 percent inflation level might indicate a balanced and good level of economic activity in the economy. 

An economy always needs a good level of economic activity to grow.

Inflation might be an indication of rising producer prices being "passed on" to consumers and or an increase in demand and spending in an economy.

Whenever there is an increase in demand in a market economy, in most cases, companies will raise prices as more and more consumers want to buy their products.