Japan Household Spending: Updated Jan. 16, 2024.

 

Japan household spending down for 7th month in Sept. as wages slide

Article source: https://mainichi.jp/english/articles/20231107/p2g/00m/0bu/006000c

Article:

TOKYO (Kyodo) -- Japan's household spending in September fell 2.8 percent from a year earlier for the seventh consecutive monthly fall, as people cut back spending on food and other items amid rising prices while real wages continue to slide, government data showed Tuesday.

Households of two or more people spent an average of 282,969 yen ($1,890), the Ministry of Internal Affairs and Communications said. The rate of decline expanded from a 2.5 percent drop in August.

Ideas:

Most likely household spending will continue to decrease as long as inflation is a major factor for Japanese households.

Real wages are wages without inflation included meaning just like inflation and GDP real GDP is GDP without the inflation factor.

Food prices, in another article, have increased more than 7%. That is huge for the lower-income groups, which spend more of their income on food than the higher income groups.

Household spending or consumer spending, is the largest part of Japan's GPD at around 50% percent or more. But its much smaller that the consumer spending level in the US at 60% or more.

Article:

Separate data showed that real, inflation-adjusted wages in September dropped 2.4 percent from the previous year for the 18th straight monthly fall.

Nominal wages, the average total cash earnings per worker including base and overtime pay, rose 1.2 percent to 279,304 yen for the 21st consecutive month of climb, but they failed to keep up with rising prices, according to the Ministry of Health, Labor and Welfare.

Ideas:

Real inflation adjusted inflation, doesn't mean wages for workers were decreased. It means the value of the wages decreased as inflation increased again.

Even nominal wages, failed to keep up with inflation as inflation continues to be a major factor in consumer spending in the Japanese economy.

Inflation in the US has declined to around 2% after increasing to 6% in 2022. Inflation in they EU remains high for whatever reason, as some blame the Ukraine war and energy supply challenges in the EU.

But some articles have suggested consumer spending in the Japanese economy remains strong despite the continued inflation situation.

Article:

Food expenditure, accounting for over a third of household spending, decreased 3.7 percent, falling for the 12th straight month, led by falls in vegetables, seaweed and meat.

Outlays for housing also declined 11.2 percent due to cutbacks on repairs and maintenance work and rents. Other categories also saw declines, with spending on clothing and shoes plunging 18.3 percent.

Ideas:

Food prices have increased the most in Japan, and as result, maybe consumers/households are either cutting back and or trying to find substitutes at a lower price.

Vegetables, seaweed, and meat might have had some not so good growing seasons and the supplies might have been reduced, which also could have increased prices too.

And also housing expenses such repairs and maintenance fall by the wayside as Japanese households decreased spending on those items too.

Spending on clothes, especially winter type clothes might have been delated as the early fall season in Japan was extremely warm, which meant consumers might have delayed spending on late fall or early winter clothes.

Article:

Among the few bright spots, expenditure for transportation and communications grew 12.4 percent, due to an increase in vehicle purchases, the internal affairs ministry said.

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

Ideas:

Most likely vehicle purchases were delayed during the pandemic and consumers are now buying again, and maybe too more smartphones are being bought again after a slowdown during the pandemic.

Households spending or consumer spending might be 50% or more of GDP in Japan, but that is low compared to the US at 60% or more. But, in fairness, Japan is more, or has been, for of a saving economy, compared the US, which is more of spending economy.

And at the same time. Japan's elderly population keeps increasing, and the elderly tend to spend less that the younger age groups.

Article:

As inflation pain continues for consumers in Japan, companies are under growing pressure to hike salaries from the government and Rengo, Japan's largest labor organization, ahead of the annual wage negotiations in spring.

The average pay hike at major member firms this year stood at 3.99 percent, the highest in 31 years, according to the Japan Business Federation.

Ideas:

The Japanese government can only suggest that companies increase wages but the Japanese government can give incentives as a way to entice companies to increase wages.

But the real challenges is with small and midsize companies who either can't because their profit margins have decreased due to inflation and energy costs and or they just don't want to do it at this time or in April of 2024 when most companies give wage increases.

Again, up o 70% percent of Japanese workers don't work for large companies which gave wages increases in 2023.while many small and medium sized companies didn't.

So it will be interesting to see what actually happens in April of 2024. Will only large companies increase wages again or will small and midsize companies also increase wages this time too.

Have a nice day and be safe!