Shoppers are seen outside a store in Tokyo. Photo: REUTERS file
business

Japan's August household spending rises for 9th month, but wages fall

11 Comments
By Leika Kihara and Kaori Kaneko

Japan's household spending rose for a ninth straight month in August, offering some relief for the export-dependent economy amid weak global demand and a protracted U.S.-China trade war.

But separate data on Tuesday showed wages fell for an eighth consecutive month, pointing to further strains on consumers as the government hiked the sales tax this month.

The mixed readings will keep policymakers under pressure to announce more fiscal and monetary stimulus measures to shield the economy from a recession, analysts say.

Household spending in August rose 1.0% from a year earlier, accelerating form a 0.8% increase in July but falling short of a median market forecast for a 1.2% increase, government data showed.

The ninth consecutive month of gains was the longest such streak since comparable data became available in 2001.

"Consumption appeared to have been fairly strong in August after weak spending in July, when bad weather kept consumers at home," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"But the outlook isn't bright. Wage growth is weak and the effect of October's sales tax hike will begin to show. Consumer sentiment has been pretty gloomy, which means risks to the outlook are tilted to the downside."

Japan rolled out a twice-delayed increase in the sales tax to 10% from 8% on Oct 1, a move considered critical for fixing the country's tattered finances.

While the government has taken steps to ease the burden on consumers by offering vouchers and tax breaks, there are fears the higher tax could hurt an economy already feeling the pinch from global pressures.

Real wages adjusted for inflation fell for an eighth straight month in August, raising concerns for private spending.

Japan's jobless rate remains at record-low levels, but job offers are slowing in a sign the fallout from the trade tensions is broadening.

Upcoming data could be hard to read as households may have made purchases ahead of the sales tax increase, which will inflate consumption data up till September and may lead to a downturn in spending from October onward, analysts say.

The strength of consumption and capital expenditure will be crucial to the Bank of Japan's decision on whether to loosen monetary policy at its rate review on Oct. 30-31.

The central bank has said while robust domestic demand is making up for the weakness in exports, it stands ready to act if risks heighten enough to derail Japan's recovery.

Any sign that job growth is peaking also bodes ill for Prime Minister Shinzo Abe's administration, which has flagged a strong job market as among its biggest policy accomplishments.

Abe pledged on Friday to deliver "all possible steps" if risks to the economy intensified, signaling his readiness to boost fiscal spending if this month's sales tax hike triggers a sharp downturn in growth.

© Thomson Reuters 2019.

©2019 GPlusMedia Inc.

11 Comments
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Does anyone know how household spending is actually calculated?

4 ( +4 / -0 )

So, household spending increased prior to the sales tax increase. What a big surprise that is, NOT! However, salaries decreased in the same period. With decreased salaries and increased sales tax means households will have far less disposable income. This will have to result in a downward trend in spending further punching the Japanese economy down the pooper.

10 ( +10 / -0 )

Well, I'd wait on being optimistic about household spending until the months after the increase in the consumption tax.

7 ( +8 / -1 )

Increased due the consumption tax increase and the retired population drawing down their savings.  Not factors that position Japan for long-term economic improvement.

5 ( +5 / -0 )

Totally expected and predicted. There were lines at my local discount supermarket prior to October 1st with people buying non-perishable goods that were scheduled to go up after the tax increase.

One thing that hopefully WONT happen is seeing consumer debt increase!

6 ( +6 / -0 )

Picture is Japan in a nutshell. Mom and her mother with single kid out shopping for parachute pants on a Tuesday while the husband is hour 8 into his 14hr shift.

3 ( +4 / -1 )

Japan in a nutshell. Mom and her mother with single kid out shopping for parachute pants on a Tuesday while the husband is hour 8 into his 14hr shift.

It would be better if Mom and her mother were both working 14 hr shifts too, and the single kid was in day-care?

Invalid CSRF

-3 ( +0 / -3 )

In 2017 Japan cut corporate tax rates and reduces their total tax burden by as high as 25% in order for them to raise income levels and help spur the economy. The result: lower income, higher taxes that greatly affect those with the least amount of income, and record savings numbers for Japanese companies.

Great job Abe.

10 ( +10 / -0 )

If these trade deals actually lower food prices significantly then I think the sales tax hike won't be a big deal.

Regarding overwork, I am still amazed that my brother in law can still work 14 hour days for almost 20 years without going mad. What time is it in Japan? Time to go to work!

2 ( +2 / -0 )

stands ready to act if risks heighten enough to derail Japan's recovery.

What recovery? You just said that the wages has been falling for the past 8 months. In reality it's much longer than that, but those are just the official numbers.

Abe pledged on Friday to deliver "all possible steps" if risks to the economy intensified, signaling his readiness to boost fiscal spending if this month's sales tax hike triggers a sharp downturn in growth.

Abe needs to hire better economic advisers, with actual real life experience and solid understanding of free market economics, so they can teach him that "growth" is not measured by GDP figures, but by indicators such as productivity growth, investments, real wage increase, savings, and few other important figures. Fiscal spending is the last thing he needs to do. Japan needs a major economic and political reform, but i don't think Abe has the capacity to do that. I don't think he has the understanding of what kind of reforms are needed, let alone the political will to do it. I just googled who is the minister of trade and economy. A guy that graduated political science and has been working in government for over 30 years. A typical career bureaucrat. A clueless leech. I bet if you ask him how many economic books have you read in your entire life, he won't be able to tell you even one. To expect an actual reform from these bureaucratic tapeworms is wishful thinking.

2 ( +2 / -0 )

Must be gravity running in the other way. How can house-hold spending increases ???. when salaries are down all . Not the Japan, that is real.

0 ( +0 / -0 )

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