Japan Household Spending: Updated May 10, 2025.

Japan FY 2024 household spending down for 2nd year amid rising prices

Article source:  https://mainichi.jp/english/articles/20250509/p2g/00m/0bu/020000c

Ideas:

A real 0.1 percent decrease for fiscal 2024 is not that much but it shows a trend that Japanese consumers are decreasing their spending as inflation continues in Japan.

A decrease of 0.1 percent might be an average so there might some who decreased their spending more and some consumers who didn't decrease their spending at all.

Food prices seem to always be in the news and for good reasons, as food expenses make up about 30 percent of all spending by households globally, not just in Japan.

The 304,178 yen might be an average again, as maybe there are some households that spent less due to the fact that they have less income to spend and they are watching every yen closely.

Yes private consumption or consumer spending might make up half of Japan's gross domestic product or GDP but the challenge has always been in Japan that its not enough as it should be much higher like in the EU or the US where is over 60 percent of GDP.

Consumer spending in Japan has challenges due to the shrinking of the Japanese population as there are less Japanese consumers to spend in the economy to keep it moving. 

So Japan depends a lot these days on foreign tourists to bridge that gap but it not enough, as Japan needs a steady influx of qualified workers that can stay and live in Japan and spend money like Japanese citizens.

Real wages while improving the last two years, haven't kept up with whats going on in Japan for many years, and real income just keeps falling behind, which means Japanese consumers/Japanese households just can't keep up with inflation even some of them might be getting wage increases.

And yes, companies keep passing on labor, raw materials costs, and energy costs to the next in the supply chain including the final retail customer.

Japan is in something kind of bubble that it can't seem to get out of no matter how hard it tries with continued inflation, companies passing on costs, and low wage growth that can't seem to get past the line where the economy can grow again.

Yes, as prices for food product continue to increase Japanese consumers will continue to cut back as much as possible which of course will hurt the Japanese economy, Japanese companies, and the Japanese labor force.

Japan is a resource-poor country which means it has to import much of what it needs and the weak Japanese yen doesn't help as it does push import prices up and makes it more challenging for Japanese consumers to buy what they need or want.

The only good idea about the weak Japanese yen is its good for foreign tourists as they now have more purchasing power and can spend more in Japan.

A weak Japanese yen is good for Japanese export companies too, as they can get more for the products overseas and it increases the Japanese current account too.

The Engel coefficient, while a very old economic idea is still very relevant today, as its a good indicator of the standard of living for a society or country.

Yes, it indicates that maybe the standard of living in Japan has decreased as Japanese households are spending more on food than ever before, but at the same time, 28.3 percent might just be an average as some households might spending more and some might be spending less. 

If we could separate inflation and spending on food it might be a different situation as maybe, as expected, if inflation were lower than there might be less spending on food. 

At the same time if wage increases in Japan were higher for all Japanese workers then spending on food might be even lower, but all of these are just ifs and not reality at the moment.

Japan used to be a somewhat smooth operating economy without all of the scandals and situations now taking place.

But now there are many different situations affecting the economy that was not there before or at least not before the bubble crash of 1989.

Inflation too, might be the reason there is less spending on transportation and communication as Japanese consumers are cutting back on everything they think they don't need.

Just because there was an increase in spending doesn't mean it was related to an increase in consume demand as the article suggests it was most likely related to higher electricity bills and rising admission and tuition fees.

Japanese families, like families everywhere spend on things they think are need and important as maybe tuition for their children to go to private universities is a major priority.

Nominal wages really don't matter and real wages is what is important and nominal wages contain inflation while real wages are wages without inflation.

Real wages indicates how much spending power a worker has and able to spend while nominal wages hide that fact.

Both 4.2 and 4.3 indicate prices are too high in Japan and the average Japanese households will continue to see their disposable income decrease as they have to pay for higher food prices and don't have much left over for other spending in the Japanese economy.

Rice is a major problem and major challenge now as rice prices continue to remain high since the so-called rice shortage of the summer of 2024, even though the Japanese government has been releasing stored-up rice supplies to try and bring rice prices down with almost now affect on prices.

Have a nice day!