Japan's Household Spending:

 Article Source:  https://mainichi.jp/english/articles/20220510/p2g/00m/0bu/020000c

Article:

TOKYO (Kyodo) -- Japan's household spending in March fell a real 2.3 percent from a year earlier, marking the first decline in three months partly due to lower expenditure on food amid price increases caused by the Ukraine crisis, the government said Tuesday.

Average spending by households with two or more people stood at 307,261 yen ($2,360), the Ministry of Internal Affairs and Communications said.

With Russia's war in Ukraine sending energy, food and other commodity prices sharply higher, Japan's core consumer prices were up 0.8 percent in March, the sharpest rise in over two years.

Ideas:

Household spending or consumer spending is always a challenge for the Japanease economy, as the Bank of Japan has been trying for many years to get consumer inflation up to the 2 percent level without much success.

So any contraints or negatives always make it even more of a challenge to increase consumer spending.

For over two years there have been supply chain shpping challenges, supply chain shipment prices increases and now add in the Ukraine war situation and the challenges become even more challenging.

And as Japanese consumers are very price conscious they are reluctant to spend even if the CPI has only inceased 0.8 percent.

Article:

A government official said the ministry was "paying close attention" but added, "It is too early to decide whether price hikes have impacted consumer behavior" as there are other factors such as the coronavirus pandemic.

Some economists expect the impact of higher costs stemming from the Russian invasion to be reflected in consumer spending from the summer, possibly slowing growth in the world's third-largest economy.

The decline in March followed a solid 6.5 percent increase a year earlier, the ministry official said. Last year's household spending was boosted by the full removal of the government's second coronavirus state of emergency, under which people were requested to stay at home.

Ideas:

Yes, the pandemic is still a factor related to consumer spending in Japan as maybe some consumers are still not about and about like before the pandemic.

Consumer spending might have increased to 6.5 percent in 2021 but as usual consumer spending in Japan is never seems to be a sustainable growth driver, as it changes a lot.

Consumer spending supposedly is up to 60 percent of Japan's GDP so you would think it was/is a solid economic growth driver. 

But unfortunately sometimes its the opposite and becomes major constraint on world'd third largest economy.

What is happening now is not consumer spending inflation but more supplier inflation which is going to effect consumer spending this summer as suppliers and wholesalers and others begin to pass on their costs along the supply chain to eventually the final consumer.

Article:

By category, food consumption fell 2.5 percent for the second straight month of decline, pressured by lower demand for seafood and vegetables amid rising prices.

The weaker spending on food also reflected the removal of COVID-19 restrictions, which spurred eating out rather than cooking at home, the official said.

The quasi-state of emergency starting in January, under which restaurants were asked to shorten opening hours and refrain from serving alcohol, was lifted in late March.

Ideas:

An economy is ver complex so any economic activity in one area might reduce activity in another ares such eating at home vs. eating out.

And as maybe some or many consumer might not have eaten for a while they might be a spike or surge in eating out for a while.

Also maybe there might have been a surge or increase in spending on alcohol at restaurants too as more consumers spent more on eating out.

Even low demand related to seafood and vegetables might mean some consumers will look for substitutes or other food to buy instead.

But just as consumers were starting to get back to more outside activities they might have seen or were starting to see an increase in prices related to the weak yen as import prices were starting to increase, and being passed on to those in the supply chain and the final consumer too.

Article:

Expenditure on energy and water bills fell 3.2 percent from the same month a year earlier, when more people were staying at home. Surging fuel costs and unseasonably cold weather also lifted electricity bills 1.4 percent.

The full lifting of the COVID-19 measures prompted consumers to increase spending on domestic trips and accommodation in the reporting month.

On a seasonally adjusted basis, household spending in March rose 4.1 percent from the previous month, following a drop of 2.8 percent in February.

Ideas:

Its only natural that as household members spent less time at home the use of energy decreased while at the same time even thought there was less time spent at home energy prices continued to increase due to the increase in global energy prices.

Whether always plays a role in energy usage and costs. For example this pre-summer period the Japanese government has already asked for less energy usage as maybe they expect there is the potential for energy blackouts if it a hot summer.

Domestic trips and accomdation spending might be increasing but its going to take some time for the domestic tourism industry to reach the pre-pandemic level.

Consumer spending is always up and down even in normal times. So it not a surprise that February might have been down while March saw an increase. Of course the pandemic had a lot to do with the February decrease too.

Article:

The average monthly income of salaried households with at least two people rose a real 2.3 percent to 503,128 yen in the reporting month, following a 0.1 percent decline in February.

In fiscal 2021, household spending rose a real 1.6 percent from a year earlier, rising for the first time in four years, but it was still lower than the pre-pandemic level in fiscal 2019.

Household spending is a key indicator of private consumption, which accounts for more than half of Japan's gross domestic product.

Ideas:

It must be remembered that average income is just an average and we really don't know, in this article what the dispersion or how many are above the average and how many are below the average.

So is not a good idea to think that every household in the Japanese economy has the same level of inconme as there might be many who are still not so good because of the pandemic situation.

And its also important to remember, even though Japan is the third largest economy in the world there might be many below the average household level.

Even though consumer spending or household spending might be 50 percent of Japan's GDP that is still less than many advanced economies where consumer spending is up to 60 percent or more of GDP.

So Japan's consumer spending, if it increases to 55 percent of GDP might see a significant increase in GDP growth.

The Bank of Japan has targeted consumer spending in the Japanese economy has a major weakness to economic growth.

One of the Bank of Japan's strategies has been to see consumer inflation increase to 2 percent as a way to increase GDP growth. But so far they have not been able to reach the 2 percent level.

And now with supply inflation increasing every week and every month its highly unlikely that consumer demand is going to see any kind of increase in the future.

Have a nice day and be safe!