Japan Household Spending: Updated Dec. 16, 2023

Japan household spending falls 2.5% in August on rising prices

Article Source: https://mainichi.jp/english/articles/20231006/p2g/00m/0bu/011000c

Article:

TOKYO (Kyodo) -- Japan's household spending in August dropped 2.5 percent from a year earlier, declining for the sixth consecutive month, as rising prices prompted people to cut back on food and education-related outlays, government data showed Friday.

Households of two or more people spent an average of 293,161 yen ($1,975), the Ministry of Internal Affairs and Communications said. The rate of decline was smaller than the 5.0 percent in July.

Ideas:

Inflation continues to cut into household spending as many households are cutting back more and more as the years goes on.

Despite the Japanese government lifting the last remaining covid restriction, maybe Japanese consumers, after some latent spending, consumers are back to being cautious about inflation and their household budgets.

It interesting that July is the beginning of the Obon season, or summer holiday season in Japan, and you would have expected more spending in July instead of decrease in spending.

Article:

The continued weakness in spending came as real wages dropped 2.5 percent in August for the 17th consecutive month of decline, as the impact of rising prices outweighed that of salary increases, separate data from the labor ministry showed.

Food expenditure, accounting for around one-third of household spending, fell 2.5 percent, led by decreases in seafood, meat, dairy products and eggs amid rising prices. Outlays for education dropped 13.6 percent as cram school expenses fell.

Ideas:

Real wages are wages absent inflation, meaning despite the 3.5 wage increases in the spring with large companies, they were enough to offset the continued increase in inflation.

Also meaning inflation for 17 months have been more than wages overall, which means household extra income, after the basics such as rent and electricity expenses are paid for households/consumes have less extra income to use in the economy each month.

At the same time, more than 70 percent or wage earners in Japan don't work for large companies, and most of the wage increases for for large companies.

For the low-income groups, unfortunately, they use more of their income on food than the other income groups. 

As the reason  for the decrease in education spending, it might be related to after-school spending for students, and parents feel they can't afford the afterschool programs at private academies at this time.

Article:

Unusually hot weather dampened appetite for autumn clothes, pushing down spending on clothing by 5.9 percent. Purchases of pesticides also fell due to fewer mosquitos amid the heat, leading to a 5.1 percent drop in outlays for furniture and household goods category, the internal affairs ministry said.

Spending on medical supplies and services plunged 11.2 percent as the demand for face masks and thermometers decreased after the legal status of COVID-19 was downgraded to the same category as seasonal flu.

Ideas:

The continued hot weather in Japan and other places, has disrupted the usual fall/winter clothes buying but no one could have predicted the continued hot/warm weather and or the record hot days in Japan. 

So as a positive, for consumers, as the stores now have large supplies of fall/winters clothes that they haven't been able to sell, maybe there will be some sales to reduce their inventories of fall/winters clothes.

For the stores or clothing suppliers it might not be a good situation and they probably had to make their fall/winter orders back in the spring or earlier and no one knew or expected the hot/warm winter would continue into September or October.

Article:

Meanwhile, outlays on entertainment grew 3.0 percent, lifted by an increase in travel as more people went out during summer vacations following the removal of coronavirus restrictions, with expenditures on overseas package tours jumping 54-fold.

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

Ideas:

Spending on entertainment, might have just been the usual summer spending and more consumers are out and about during the summer season.

Even overseas trips saw an increase, which is surprising considering the weak yen, which means Japanese travelers going to South Korea, the EU, or the US have to pay more as their purchasing power is less with a weak yen.

Of course maybe many might have saved up and bought South Korean won, EU euros, or US dollars before their trip.

Consumer spending or private consumption is not has big in Japan as the US which is maybe close to 60/70 percent of GDP while in Japan its just more than half of the Japanese GDP.

At the same time Japanese consumers, traditionally, are not big spenders compared to US consumers who tend to spend more but save less, while in Japan the opposite is true.

Have a nice day and be safe!