Japan Household Spending Declines for 5 Consecutive Months... Cloud Over Economic Recovery

[Asia Economy Reporter Kim Hyunjung] Due to weak demand caused by the spread of COVID-19, Japan's household spending recorded a decline for five consecutive months as of December last year.

Reuters reported on the 7th (local time) that Japan's household spending in December last year decreased by 0.2% compared to the same month the previous year, falling short of the market forecast of a 0.3% increase previously announced by the agency.

Takeshi Minami, Chief Economist at Japan's Norinchukin Research Institute, stated, "When comparing the current quarter with October to December, consumption is expected to turn negative," adding, "This indicates that the economy may contract from January to March."

The month-on-month figure rose by 0.1%, below the forecast of 0.7%. On a seasonally adjusted basis for the fourth quarter, it showed a 4.6% increase compared to the previous quarter.

With the weak December figures, the government's expectation that a rebound in consumer demand would support the economy is turning into concern. On the same day, the Japanese government announced that due to global inflation and an increase in part-time work, household purchasing power declined, with the adjusted real wage growth rate for December falling by 2.2% year-on-year, marking the largest drop since a 2.3% decline in May 2020.

Economist Minami forecasted, "Pressure on real wages may lead consumers to reduce spending by avoiding unnecessary purchases and increasing savings," adding, "Overall consumption momentum could be lost."

Meanwhile, the Japanese government is scheduled to announce the preliminary figure for the fourth quarter's Gross Domestic Product (GDP) on the 15th.

This content was produced with the assistance of AI translation services.