Japan Household Spending:

 Article Source: https://mainichi.jp/english/articles/20220805/p2g/00m/0bu/027000c

Article:

TOKYO (Kyodo) -- Japan's household spending in June rose a real 3.5 percent from a year earlier, increasing for the first time in four months, as more people went out after the removal of coronavirus restrictions, the government said Friday.

Average spending by households with two or more people stood at 276,885 yen ($2,070), the Ministry of Internal Affairs and Communications said.

By category, spending on culture and recreation rose 13.3 percent from a year earlier, up for the third straight month, as more people traveled amid fewer COVID-19 infections in the reporting month, according to the ministry.

Spending on clothing edged up 0.2 percent, marking the fourth consecutive monthly increase, after many parts of the country saw an early end of the rainy season followed by heat waves.

Although higher product prices stemming from Russia's invasion of Ukraine likely discouraged people from spending actively, other factors such as weather conditions influenced people's spending behavior, a ministry official said.

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

Ideas:

Maybe the euphoria of finally being able to get out and about exceeded the inflaion concerns, at least for time being.

Travel might have seen a slight increase because maybe some or many people are still not sure about traveling. Maybe as Japan gets closer to the Obon season more people will begin to feel better about traveling.

Spending on clothing can always be seen as somewhat seaonsal and or some might be waiting for the usual summer sales to begin.

Japan is not usually a big spending country as consumers in Japan are a little more hesitant to spend compared to consumers in the US who are sometimes characterized as free spending consumers.

So there might be or has been a slight increase in consumer or household spending in Japan, the trend or historical implications are not in favor of Japan being able to depend on consumer spending alone to see any real economic growth related to consumer spending.

So even though the Bank of Japan's goal of 2.0 percent increase in consumer inflation has not been reached yet, its still highly unlikely it will ever happen soon.

One of the big reasons is consumers/workers have not had a significant wage increase in many years if not decades.

If inflation continues to increase it means consumers have less and less disposable income to use on things besides just paying their normal bills.

So the idea of significant increases in travel, going to restuarants, buying extra clothes, buying something at Yodobashi Camera might be out of the question for now.

Household or consumer spending might be up to 50 percent of Japan's gross domestic product or GDP, while in other advanced economies its up to 60 percent or more in their economies.

So maybe at 50 of Japan's GPD is not enough to depend on consumer spending at a driver of economic growth in Japan. Maybe, however possible, it needs to get up to 60 percent like in other advanced economies.

Of course, again, that most likely is not going to happen until companies begin to offer increases in wages that are significant enough for Japanese consumers to feel good about how much extra disposable that they have.

Consumers have to feel good about what they make and how much they have left over. Until that happens consumer spending is not going to be significant enough in Japan for sustained economic growth.

Of course the biggest challenge Japan has related to consumer spending is its ageing population. The aged tend to spend less than the younger age groups. 

And as Japan is either #1 or #2 with South Korea, Japan needs to find a way to ovecome the ageing challenge.

As Japan ages more and more there will less spending in the Japanese economy.,

And most likely increasing the sales tax, beyond was it is now at 10 percent, is not going to increase consumer spending overall.

Possibly some kind of incitives for younger groups to spend more, despite the wage challenge.

Such giving tax breaks related toincreased credit card spending, Whatever is needed and doable the Japanese government should consider.

Have a nice day and be safe!