Japan’s household spending rose for an eighth month in July, albeit at a slower-than-expected pace, offering a warning about consumption in an economy already struggling with weak external demand amid the bitter U.S.-China trade war.
Risks from a global slowdown and the trade standoff between the United States and China, the world’s two largest economies, are threatening economic growth and have added pressure for the Bank of Japan to expand stimulus.
Household spending in July increased 0.8% from a year earlier, but the pace of growth was slower than a 2.7% rise for June and fell short of the median forecast for a 1.1% gain, government data showed on Friday.
Despite the slower pace of growth, the rise marked the longest run of expansion since comparable data became available in 2000, and points to resilience in domestic demand ahead of a scheduled sales tax hike to 10% from 8% next month.
From the previous month, household spending slipped 0.9% in July, which compared with a median forecast for a 1.3% decline.
Fewer purchases of air conditioners, refrigerators, food and electricity slowed the pace of spending, the data showed, which officials attributed to cooler weather.
“In July, the rainy season was long and…temperatures were really low, especially in the second half of the month,” a government official said at a briefing.
Japan’s economy has benefited from strength in household consumption and capital expenditure this year, growing an annualized 1.8% in the second quarter largely thanks to those sectors less affected by slowing trade.
But concerns about the outlook remain. Separate data showed real wages in Japan adjusted for inflation slipped for the seventh month in July, pointing to potential trouble for consumer and business sentiment ahead.
“The fall in wages in July was driven by a slump in bonus payments,” Marcel Thieliant, senior Japan economist at Capital Economics, wrote in a note.
“Wage growth should rebound toward 1% over the coming months.”
There are also worries weakness in manufacturing, following an eight-month slide in exports, could spread to other parts of the economy, casting a cloud over the outlook.
Analysts have warned the economy may lose steam after the sales tax hike, threatening to leave the world’s third-largest economy without a growth driver unless global demand picks up.
Expectations have risen the Bank of Japan will ease further after the central bank at its last policy meeting committed to expanding stimulus if a global slowdown is delayed and threatens to derail Japan’s economic recovery.
Meh. People don’t get paid well so they don’t spend.
Get some last spending in before the tax-hike hits. It will all go downhill from October.
Also, more stores trying to trick the customers by writing the new price (without the tax) in big numbers and in tiny numbers write the real price or 税別
Are the figures not inclusive of spending by chinese tourist.
I always take numbers issued by the government with a pinch of salt.
These cats lie through their butts to sugar-coat the reality of the Japanese economy. The months of growth match the summer bonus payments and a surge in spending before the sales tax increase. It’ll take some creativity to sugar-coat the huge drop in sales over the next three months. The first sales tax hike resulted in a drop in spending of up 25% depending on the sector and it has not recovered. And, salaries have continued to drop in the same period. One does not need to be an economist to realise that, with zero inflation and zero wage growth combined with the ever increasing costs of living the Japanese economy is doomed!
My spending has certainly increased but it is on electricity for the air con and gas for showers!
I use vending machines for drinking water too in the hot summer too.
I guess it is the same for most other people…
We’re spending more as things cost more, the price of food has gone up a lot.
drluciferToday 05:04 pm JST
“Are the figures not inclusive of spending by chinese tourist.”
I wouldn’t be able to tell you about that because I don’t know which statistics this article it based on. But I do know the Japanese government collects information on household spending trough detailed questionnaires filled out by households selected at random. I know about this because my lucky (ha ha) household happened to be selected twice over a period of 35 years in two different cities. They wouldn’t take no for an answer and it was a fairly time-consuming chore. When I say detailed I mean detailed. We couldn’t just note that we spent 1,000 yen on vegetables. It was how much for a daikon radish, how much for a cabbage, etc. On the plus side, the first time I did it it really accelerated my ability to read Japanese, ha ha.
And my point being that statistics based on those questionnaires would not include spending by tourists.
Many people are spending because of the tax hike. My wife and her mother keep telling me we should buy many things before the price goes up.
What I tell them is it’s only 2%.
For groceries like vegetables etc, I tend to rely on the local farmer who puts the daily produce out & you just feed the coins in the box if he’s not around.
A bit cheaper than the local supermarket.
Toasted Heretic – For groceries like vegetables etc, I tend to rely on the local farmer who puts the daily produce out & you just feed the coins in the box if he’s not around.
Good for you! There’s a bit of a shortage of local farmers in central Tokyo though.
Good for you! There’s a bit of a shortage of local farmers in central Tokyo though.
True, dat.
One of the reasons why I’m glad to live out in the sticks. No disrespect to Tokyoites, of course!
when you keep raising prices and taxes kinda hard to spend less
Real wages down while corporate profits were the second highest in the nation’s history. Nope, no exploitation taking place there.
Let’s have cheers for Japan’s “free market” reforms!!