Japan’s household spending growth in May slows down from last month Reuters

Daniel Leussink

Tokyo (Reuters)-Japan’s household spending in May increased at a double-digit rate due to consumer purchases of cars and mobile phones, but due to the new wave of COVID-19 infections that affected consumer confidence, the growth rate was slower than last month. slow.

After the Japanese government took “quasi-urgent” measures in Tokyo and other major areas to curb the recurrence of infection, the Japanese economy is struggling to get rid of the drag of the coronavirus pandemic.

Government data on Tuesday showed that after an increase of 13.0% in April, household spending increased by 11.6% year-on-year in May, which was the third consecutive month of growth. This is stronger than the 10.9% increase expected by the market in the Reuters survey.

However, the recoil effect of last year’s plunge has severely affected earnings, when the pandemic and nationwide emergency caused businesses to shut down and disrupt daily life.

Excluding large items such as houses, cars, and gifts, household spending increased by 8.9% year-on-year, but fell by 6.5% compared to the same month two years ago-indicating that recovery needs time to rest.

“If the restrictions on economic activity are not completely lifted, service spending will be difficult to recover,” said Takumi Tsunoda, a senior economist at the Shinkin Central Bank Research Institute.

“Although vaccination is progressing faster than expected, its (economic) impact may not be seen until September or later.”

According to data from the Ministry of Internal Affairs and Communications, the month-on-month data showed a contraction of 2.1%, while the forecast fell by 3.7%.

Kakuda said that although spending in May fell less than expected from the previous month, weak auto sales in June — partly due to the impact of semiconductor shortages on supply — may affect spending last month.

The increase in spending in May is unlikely to allay concerns about the recovery of Japan’s lagging behind other major economies such as the United States. The International Monetary Fund predicts that the United States will grow by 7.0% this year—the fastest rate in a generation.

The combination of the risk of another surge in infection and the country’s slow vaccination campaign has weakened consumer and business confidence.

Another data released on Tuesday showed that inflation-adjusted real wages in May had the largest year-on-year increase since June 2018, partly due to the surge in overtime pay.

Some analysts worry that the Japanese economy may fall back into recession in the second quarter, that is, contracting for two consecutive quarters, as consumer and business confidence have been hit by measures to curb the rise in coronavirus infection.

On Monday, a private company survey showed that service sector activity in Japan contracted for the 17th consecutive month in June.