Japan's household spending in October falls 1.3% amid rising prices

When will you finally understand. Japan is loosing 150.000 people a month. They don’t consume anymore.

Japan is behind the curve on rising inflation, everywhere else has suffered from it, but in most countries salaries increased or the government provided support during the pandemic.

We keep reading that salaries are increasing, but that is only for a small number of workers lucky enough to be employed at some of the largest companies in the country. Many others won't see a rise in salary all the while prices just keep going up.

What is a bit baffling is the yen while very weak, has stabilized at the Y150 range, as well as oil being at about the Y65,000/kl. So you would think prices would do the same, but almost monthly we get another report of 200-300 product price increases. The poor Japanese consumer's purchasing power is falling like a stone!

The added stress on reliance on a weak yen for influx in tourism while simultaneously making domestic travel more expensive directly because of increased tourism is wreaking havoc on the very people that can least afford it and require the government to protect them the most. This cycle is chaotic, who knows where things will be if this continues a further few years.

The spending will rise at the end of the year.

MarkX,

What is a bit baffling is the yen while very weak, has stabilized at the Y150 range, as well as oil being at about the Y65,000/kl.

I notice this and cannot understand it either. Apples in JA are being sold at 300 yen each! A whole daikon is 400 yen. The bottle of coffee that I used to buy every morning has shot up overnight from 100 yen to 160.

Perhaps salaries for government workers and the employees of large corporations have gone up, but for people working in small businesses they haven't. How could they? Where would the money come from?

What is going on?

I notice this and cannot understand it either. Apples in JA are being sold at 300 yen each! A whole daikon is 400 yen. The bottle of coffee that I used to buy every morning has shot up overnight from 100 yen to 160.

Huh? How is that possible? Don't you know the "official" annual inflation rate is just 2.3%....

Spending always falls in Oct.

Check back in December and January

It will fall again in Feb.

It does every year

An apple is ¥268

A cabbage is ¥400

Rice is at ¥6-7,000 per 10 kilos now.

Everything is going up but not wages.

To those talking about spending patterns in different months, remember these figures are YoY, Japan’s overall GDP is already down YoY in the first three quarters of this year compared to last, and considering household spending is a reasonably good and timely proxy for private consumption, which in turn makes up more than than two thirds of GDP, it does not bode well for the full-year figure.

That's pure nonsense and contradicts every logic and mathematics. Of course amid rising prices also the spending rises, otherwise it is not a spending. If a chocolate package you bought before was 200yen and the next is now 300yen AND you really buy it this time too, then your spending increases 100yen in relation to the former spending. If you don't buy it, it is not a spending at all and impossible to tell, if the spending rises or falls, because it simply doesn't take place.

I think is going to be the norm. As people see prices rise, health care rise and people are aging they will prioritize saving over “spending”. I think spending on essentials is probably the same the spending on treats and stuff might decline. I know I’ve tightened my belt. Didn’t go out to restaurants because I noticed the pinch ouch factor. Inflation might be 1 or 2 % but I see stuff go up 50% or near double.

This is the direct effect of the hyperinflation currently going on and of the collapsing currency.

The average real salary was 4.59mil in 2021, then decreased to 4.54mil in 2022, 4.42mil in 2023, and this year is going to be below 4.3million Yen.

You don't have to take my word:

https://www.statista.com/statistics/612513/average-annual-real-wages-japan/

And when the food, utilities and living expenses are getting significant price hikes every 2 months, what would the government expect? For people to overspend like on the bubble era, 30, 40 years ago?

Japan is getting poorer and poorer by the month, and people here are still living in deep contemplation and passiveness, with the "shoganai" as the main lead word.

@Divinda

"Don't you know the "official" annual inflation rate is just 2.3%"

In Japan food is not included when calculating inflation.

The added stress on reliance on a weak yen for influx in tourism

This is often stated but the effect is probably hyped. Most tourists come from South Korea, Taiwan, and mainland China. Their currencies have not moved as dramatically against the yen as the USD has. American tourism to Japan is still very low. I don't see a reversal in USD-JPY as affecting tourism to Japan. Most people coming are loaded and prices in Japan, 600 yen for UNESCO site temple entrance (vs. 10 GBP in the UK), 800 yen for the onsen, 1000 for ramen with toppings, will still be cheap when 20% higher.

Tourism is also a tiny part of the Japanese economy and should not be driving macro policy.

I'm pro tourism, fwiw.

It's not surprising, when you take into account:

1) Aging and depopulation

2) Decline in Yen purchasing power relative to both other currencies and on a real asset/commodity basis

3) Auto sector downturn due to EV global competition

4) Political chaos in Japan

5) Chinese economic growth underperformance

6) Fears over looming tariffs under Trump

Tourism of course a positive offset but consider that prices are clearly rising, and that these sales figures are not inflation adjusted, real unit volumes down well over 5%, even with the surge of tourists.

Obviously, goes without saying that when overall real wages are trending down on average for years now, pretty tough to expect consumer growth to pick up.

Stagflation

yep, no doubt it's stagflation in many countries now, especially Europe. What's different in Japan is its limited to imported inflation due to weak Yen. US has the rich keeping economy afloat, plus the Trump catalyst now.

Meanwhile land prices (inflation adjusted basis) continue to fall in Japan, as population ages & shrinks - BIG MESS.

Q; there is always a delta between expat weekly shopping costs and that of 'locals'. why, ,expats got more money they pay more'. Economically I cannot make sense of all the factual? data being thrown around. Th yen has been week, th stock market delivering more than decent 'yen' returns, somebodies got cash in the banks. to make sense you need the bank details, all the above is street gossip.

Tourists to Japan (until September 2024)

South Korea 656,700

China 652,300

Taiwan 470,600

USA 191,900

Hong Kong 170,200

Australia 85,700

Canada 50,000

Philippines 46,600

Vietnam 45,800

Stagflation?

The European Commission predicts that the EU's GDP growth rate in 2024 will be 0.9%, and moderate growth is expected to continue. The eurozone economy is expected to see a moderate increase in personal consumption due to an increase in real income following the easing of inflationary pressure. In addition, financial support from each country and investment support from the European Recovery Fund are also expected to support capital investment.

With so many variables and averaging across such a wide social spectrum, a 1.3% change is too small to be of any relevance. The difference in prices of a basket of common retail goods is a better benchmark, set against wages in specific sectors. Property prices are irrelevant as they don't track the economy in Japan the way they do in most countries. And I can't believe people stayed away from chocolate, just to save a few yen. The warm weather saved everyone some cash. Energy costs are a real problem, and will keep rising for a good few years.

There have been problems globally for food supplies over the last two years. Rice always makes the news, but most fruit and veg supplies have been under pressure, exacerbating the financial issues (low JPY, high USD). Weather problems are affecting harvests of both out of season crops from abroad and in season crops domestically. Rice and root crops are at risk whenever there is flooding. Eggs and poultry are being affected by bird flu culls.

Many crops are grown in poorer countries that cannot afford the deployment of expensive irrigation, flood mitigation or crop protection measures, so they are more vulnerable to extreme weather. Even farmers in G7 countries suffer from low incomes and lack of investment, profits being cannibalised by other parts of the supply chain.

There are increasing biosecurity restrictions that limit the movement of produce across borders. That also impacts supply and raises prices. Trade barriers and artificial geopolitical restrictions such as protectionism increase prices. Trump's tariffs will only increase prices in the US and may reduce costs outside America, unless politicians play games and implement tit-for-tat tariffs. That will increase domestic prices without offering any tangible political advantage (Trump only cares about the headlines, not the actual figures).

Next year should be a little easier if El Niño issues subside, although other factors may increase climate instability. And retail prices rarely go down. At best they just go up by less each month. So spend less on non-essentials, waste less, develop your side hustle and grow some food yourself. A standard suburban garden will allow you to be self-sufficient in several food crops for about 3 months. Max this out, selling your surplus and storing food, and you can really improve your finances. On a balcony you can grow things like tomatoes, herbs, strawberries, cut-and-come-again greens and even runner beans, which will crop for months in a pot up a couple of bamboo sticks, securely tied to something. Japan has quite a lot of urban allotment options. Check out Share Batake, Shimin Nōen and Kumin Nōen. A good way to meet the locals, get fit and get some mud under your fingernails.