(May 12): Japan’s household spending fell for a fourth consecutive month even as wages continued to grow, highlighting the fragility of consumption.
Outlays by households adjusted for inflation declined 2.9% in March from a year earlier, the Ministry of Internal Affairs and Communications reported Tuesday. Economists had forecast a 1.3% drop. Compared with February, spending fell 1.3% on a seasonally adjusted basis.
Transportation and communications were the biggest drag on spending in March, while food, utilities and clothing also weighed on the figure. On the other hand, households doled out more on essentials like medical care and housing.
The decline in spending portends a fragile outlook ahead. While the pace of wage growth exceeded inflation for a third straight month in March, the war in Iran has turbocharged energy prices, raising concerns inflation could accelerate.
The Bank of Japan warned in its latest outlook report that consumer prices excluding fresh food could rise 3.1% this fiscal year and 3% in the following 12 months if oil prices stay elevated and the yen weakens materially.
See also: Japan’s regional bank merger wave to create US$74 billion lender
The outbreak of the war in Iran prompted the steepest decline in consumer confidence in March in almost six years, and the gauge edged lower still in April. Meantime, the outlook among the nation’s merchants slumped in March to the lowest since the pandemic.
At the same time, an initial count in March from Japan’s largest labour union umbrella group Rengo showed workers at the nation’s biggest firms secured wage increases of around 5% for a third straight year.
Prime Minister Sanae Takaichi has rolled out an array of subsidies to soften the blow from inflation, including aid to lower utility fees at the start of the year. After gasoline prices spiked to a record ¥190.8 ($1.54) per litre in March, the premier introduced subsidies to cap the price around ¥170.
See also: Nidec shares tumble after scandal spreads to product quality
While such measures have insulated households somewhat from high energy prices, consumers may start to feel the war’s impact on electricity and natural gas bills from around June, Trade Minister Ryosei Akazawa said last month. The Takaichi administration has so far ruled out the need for a fresh supplementary budget to support the economy.
Uploaded by Chng Shear Lane
