Shoppers look at goods in a store in Tokyo. Photo: REUTERS file

Japan household spending falls again in November

By Kaori Kaneko

Japanese household spending fell for a second straight month in November and by more than forecast, suggesting that higher sales taxes may weigh on private consumption for sometime.

The world’s third-largest economy is struggling to regain momentum after households tightened their belts following the sales tax hike in October and as slower global demand hit exports. Weak consumption will add to the chances economic growth could stall in the final quarter of 2019.

Household spending fell 2.0% in November from a year earlier, government data showed on Friday, worse than a median forecast for a 1.7% decline.

It tumbled 5.1% in October, the biggest fall since March 2016 when spending slid 5.3%.

From the previous month, spending rose 2.6% compared with the median estimate for a 3.4% gain and was a rebound from the steep 11.5% monthly drop in October.

“The pace of a pick-up in household spending in November after a huge drop in October is weak. It is unclear if the spending will recover steadily in coming months given the tax burden and tepid wage recovery,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“Not only consumer-related data, but also other data, especially factory output, are weak. The focus will be how much the economy shrank in the fourth quarter and how much it will recover in the current quarter.”

A pick-up in consumer spending is needed to help underpin the economy and achieve the Bank of Japan’s elusive price target.

Although some companies started passing on rising costs to households, many are still reluctant to do so for fear of losing customers as higher prices could dent consumer spending.

Data showed spending on items such as durable goods, including air conditioners, remained weak, but picked up on items such as foods and personal computers.

Japan raised the sales tax to 10% from 8% on Oct. 1, a move that is seen as critical for fixing the country’s tattered finances.

But recent weak data on exports and factory output as well as impact from the tax hike suggest the economy could shrink in the fourth quarter after growing an upwardly revised annualized 1.8% in the July-September period.

Weak household spending also bodes ill for the economic recovery, with some analysts expecting consumer spending to contract.

Sluggish wage recovery is adding to worries about private spending, with inflation-adjusted real wages declining at their fastest pace in four months in November.

A central bank survey showed Japanese households’ confidence in the economy sank to a five-year low in the three months to December.

Japan launched a $122 billion fiscal package last month to support stalling growth and as policymakers look to sustain activity beyond the 2020 Tokyo Olympics.

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

Login to comment

Japanese household spending fell for a second straight month in November and by more than forecast, suggesting that higher sales taxes may weigh on private consumption for sometime.

Why it's becoming a surprise?

9 ( +9 / -0 )

Japan has some of the lowest minimum wages in the developed world. It raised consumption tax to 10%, ignores corporate greed, fails to integrate women into the business world, has a high national debt to GDP, 20% of children are living in poverty, housing is too expensive, banks don't pay any interest on people's money and you wonder why household spending falls!

9 ( +9 / -0 )

The Japanese economy has been like this for 30 years-nothing changes...

6 ( +6 / -0 )

Didn't expect anything else!

6 ( +6 / -0 )

Tax up wages stagnant 60% of the population on short term contracts. I'm suprised the figures are that good...wait a minute these are government figures. Next month they will admit that a disabled worker made a mistake due to a heavy workload. And they hope to gain understanding about this regrettable situation. Shogani, screw you is what Shogani actually means.

8 ( +9 / -1 )

It's very easy to feel bitter when as long term resident you go from permanent to contract roles. And... by contract it means you get paid 1/3 of what you previously got paid,and although you have set contract hours - you have to work the same hours as you did previously when permanent, but simply not declare them, as the Company wont pay you unauthorised overtime... yeah, very easy to feel bitter, but hey, at least I have a job, and can pay those higher taxes.... so what's left in my wallet at the end of the month, not as much as i had when I was permanent staff, so like most reasonable people, I won't be spending what I don't have to spend.... now why would anyone be surprised at that - it's common sense right ? I guess, its the same story for the rest of the 60% mentioned by Cricky... why would any sane person be surprised at that ?

1 ( +1 / -0 )

Japanese corporations are sitting on large cash reserves for no good economic reason. So they could easily feed some of that back through the economy by raising the wages of the lowest paid (it’s been shown across the world that extra money paid to the lowest paid is spent mainly on necessities which are mainly domestic, so little goes on imported luxuries but is recycled through the economy). Failure to do so shows a lack of basic economic understanding from senior managers.

2 ( +2 / -0 )

@englisc asprygend - Current Capitalism does not support your argument. Why pay our lazy workers more ? They do the job they are paid for, otherwise they can leave - and then and only then will we have to pay more to acquire workers to do that job, but we can always move operations overseas to a cheaper Economy where we can pay even less, and the Workers there will be happy to be paid for working at that rate... Sounds Familiar ?

1 ( +2 / -1 )

Plaza accord.

-2 ( +0 / -2 )

My form of protest will be to actually go to the election to submit no vote just to have me included in statistics and to avoid spending money on anything in Japan besides food and transportation.

0 ( +0 / -0 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites