Japan Household Spending in Aug.

 Article Source: https://mainichi.jp/english/articles/20221007/p2g/00m/0bu/014000c

Article:

TOKYO (Kyodo) -- Household spending jumped a real 5.1 percent in August from a year earlier as Japan had its first summer in three years without anti-coronavirus curbs, prompting consumers to spend despite the rising cost of living clouding the economic outlook, government data showed Friday.

Japanese households spent an average of 289,974 yen ($2,000), up for the third straight month. But real wages fell 1.7 percent from a year earlier, down for the fifth straight month, threatening to cool consumer sentiment and posing a challenge for the government and the Bank of Japan.

Rising prices of energy and everyday items have been weighing on consumer sentiment in the absence of wage growth, which has not been seen in Japan for years. Japan's core consumer inflation rose 2.8 percent in August.

Ideas:

It must be remembered that part of the increase in consumer spending might be increase in prices that consumer now have to pay for. 

Yes, the curbs has definitely helped but eventually consumers might begin to get weary of the increased price increases and begin to spend less.

Real wages tell the real story and inflation keeps cutting into the value of wages and more and more consumers find they have less to use for the spending.

Again its a case for the chicken and the egg. What should come first; consumer demand and then companies increase wages or companies increase wages and consumer demand will follow.

Article:

Prime Minister Fumio Kishida is asking Japanese firms to consider keeping salaries at least on pace with accelerating inflation when they hold management-labor union wage negotiations next spring.

More robust wage growth is also a critical factor for the Bank of Japan which still believes it necessary to maintain its ultralow rate policy to protect the economy from surging commodity prices, amplified by the yen's recent sharp drop.

Outlays on entertainment, hotel stays and package tours gained 20.6 percent while spending on transportation and communications gained 11.6 percent, the Ministry of Internal Affairs and Communications said.

Ideas:

Yes, its a good ideas to keep wages on pace with inflation but that is probably not a reality in Japan, as maybe some or many companies see their profit margins being decreased because of energy and material price increases.

Well, what just what is surging commodity prices if they aren't in Japan already as company after company continue to pass on their surging costs to the next in the supply chain including the final consumer.

But lets give the BOJ the benefit of the doubt here and say maybe commodity prices might be even higher if the BOJ didn't keep rates low.

Again its good that the services sector is improving but again how much of the surge is really just an increase in prices compared to a real increase in consumer spending in the services sector.

Article:

Expenditure on health and medicine increased 15.1 percent, as Japan saw a surge in COVID-19 cases driven by the Omicron variant of the coronavirus this summer.

Japanese people spent less on furniture and household items than a year earlier when many areas of the nation were under a COVID-19 state of emergency. The figure was down 10.8 percent, driven by reduced outlays on air conditioners and other home appliances.

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

Ideas:

Perhaps a 15 percent increased in health and medicine services wasn't that bad as maybe many people just didn't go to a clinic and just stayed home to recover. 

As home energy costs increase maybe some or many families decided not to upgrade or buy new air conditioners because of the increase in prices. 

At the same time maybe more people were out and about and not cooking meals at home as much but going to restaurants and maybe, for example the prices of home appliances are now too expensive at Yodobashi Camera and other places and are waiting to buy that new home appliance.

Consumer spending over the next few months might begin to see a significant decrease as the summer season has gone and the lull before the holiday season begins.

Article:

Japan's economy has bounced back from the impact of COVID-19 countermeasures but its pace of recovery has been relatively slow compared to other major economies like the United States.

Japan should aim for an economic growth rate of 2.0 percent to 2.5 percent in real terms in fiscal 2022 and 2023 by promoting pay increases that can support consumers, private-sector members sitting on a government panel said earlier this week.

The government is planning a new economic package for the end of October that will include steps to ease the pain of inflation on households.

Ideas:

It has to be understood that Japan's economic growth has always been behind other major economies since the 1990's. 

Yes, the Japanese economy has bounced back some but it has a long way to reach its pre-pandemic level.

If the Japanese economy does reach  a growth rate of 2.0 percent it has to be remembered that the economy has many positives and negatives in that maybe all sectors might not have grown 2.0 percent.

And again what should come first; wage increases or consumer demand increases. If companies begin to see a significant increase in then consumer demand, meaning an significant in sales and profits they might begin to increase wages.

On the other hand if companies increase wages that might spur a significant increase in consumer demand and sales.

But again it might not be reality has companies are fighting increases in energy and material costs which are reducing their profit margins which means they have little to no room for more costs such as wage increases.

Have a nice day and be safe!