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

[Image source=Yonhap News]

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

Local media including the Nikkei newspaper reported on the 8th (local time), citing the December Monthly Labor Statistics Survey released by Japan's Ministry of Health, Labour and Welfare, that household expenditures in Japan in December last year decreased by 0.2% compared to the same month the previous year. This figure fell short of the earlier market forecast of a 0.3% increase.

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 showed a 0.1% increase, falling 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 2.2% year-on-year?the largest drop since a 2.3% decline in May 2020.

Local media analyzed that the rise in consumer prices, combined with a decrease in winter bonuses and an increase in the proportion of part-time workers, pulled down real wages. The consumer price index for December rose 2.2% compared to the same month last year, an increase from November's 1.7%.

The total cash earnings per person, equivalent to nominal wages, amounted to 546,580 yen (approximately 5,682,100 KRW), down 0.2% from the same month last year, marking a decline after 10 months. Regular workers saw a 0.2% increase to 749,358 yen, while part-time workers recorded a 0.9% increase to 112,236 yen.

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

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

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