Japan’s household spending fell at the fastest pace on record in May as consumers heeded authorities’ calls to stay home to contain the coronavirus pandemic, pushing the world’s third-largest economy deeper into decline.
The large spending drop will add to growing pressure on policymakers to ramp up moves to restore confidence among businesses and in particular consumers.
Household spending slumped 16.2% in May from a year earlier, government data showed on Tuesday, falling at the quickest pace since comparable data became available in 2001.
The drop, which was larger than a median market forecast a 12.2% fall, followed an 11.1% decline in April.
A spending recovery is expected to be fragile and take time as households remain reluctant to loosen the purse strings even after a nationwide state of emergency was lifted in May.
Still, the Bank of Japan is expected to roughly maintain its view the economy will gradually recover later this year, sources familiar with its thinking told Reuters.
Tuesday’s data showed large cuts in spending on hotels, transportation and eating out as people stayed at home.
On the other hand, stay-home policies boosted spending on pork and beef, alcohol and sanitary goods like face masks.
Overall, the outlook for household spending is dim for the months ahead because of an anticipated rise in job losses, which is weighing on sentiment.
Separate data on Tuesday showed May inflation-adjusted real wages dropped at the fastest pace since June 2015, in a sign of stress in the labour market.
The world's third-largest economy is bracing for its worst postwar slump in the quarter through June, with economists expecting an annualised contraction of over 20% after a massive demand shock due to lockdown measures in response to the virus outbreak.
Real wages, a gauge of household purchasing power, tumbled 2.1% in May from a year earlier, labour ministry data showed, falling at the fastest pace since a 2.8% decline in June 2015.
"The impact from the coronavirus led to a reduction in overtime pay which caused real wages to fall a lot," a labor ministry official told Reuters.
Overtime pay, a barometer of strength in corporate activity, saw its biggest decline since comparable data became available in January 2013, slumping 25.8% in May from a year earlier, down for a nine straight month.
The monthly wage data showed nominal total cash earnings dropped 2.1% in the year to May, also seeing their largest fall since June 2015, following a revised 0.7% drop in April.
Regular pay - or base salary, which makes up most of total cash earnings - was up, rising 0.2%, the data showed. One-off special payments shed 14.0% following a downwardly revised 6.4% gain in April.
The ministry defines "workers" as 1) those who were employed for more than one month at a company that employed more than five people, or 2) those who were employed on a daily basis or had less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted, at a company that employs more than five people.© Thomson Reuters 2020.