TOKYO – Japan’s household spending rose at a double-digit rate in May as consumers bought cars and mobile phones, though the pace of growth slowed from the prior month as a new wave of COVID-19 infections weighed on consumer confidence.
Japan’s economy is struggling to shake off the drag from the coronavirus pandemic after the government put in place “quasiemergency” measures in Tokyo and other major areas to curb a resurgence of infections.
Household spending grew 11.6 percent year-on-year in May, the third month of gains, after a 13.0 percent rise in April, government data showed on Tuesday. That was stronger than a median market forecast for a 10.9 percent gain in a Reuters poll.
But the gains were heavily skewed by the recoil effect from last year’s plunge, when the pandemic and a nationwide state of emergency shuttered businesses and disrupted day to day life.
Stripping out big-ticket items like housing, cars and gifts, household spending was up 8.9 percent year-on-year, but down 6.5 percent compared to the same month two years earlier – a sign the recovery is taking time to bed in.
“It will be hard for services spending to recover if curbs on economic activity are not lifted completely,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
“While the vaccination rollout is progressing more quickly than thought, its (economic) impact may not be seen until September or later.”
The month-on-month figures showed a 2.1 percent contraction compared with a forecast decline of 3.7 percent, the Ministry of Internal Affairs and Communications data showed.
While May’s expenditure declined less from the previous month than thought, weak car sales in June – partly due to the impact on supply of a semiconductor shortage – were likely to weigh on last month’s spending, Tsunoda said.
The spending growth in May is unlikely to dispel worries that Japan is lagging recoveries seen in other major economies such as the United States, which the International Monetary Fund is forecasting to grow 7.0 percent this year – the fastest pace in a generation.
The combination of the risk of another spike in infections and a late vaccination drive in the nation has dented both consumer and business confidence.
Meanwhile, Japan’s real wages posted the biggest monthly rise in nearly three years in May, in part due to a surge in overtime pay, although the gains were inflated due to the comparison with last year’s pandemic-driven drop.
Inflation-adjusted real wages, a key measure of households’ purchasing power, gained 2.0 percent in May compared to the same month a year earlier, marking their largest rise since June 2018, the labor ministry said on Tuesday.
That followed a 1.9 percent gain in April, which was revised down from an initial 2.1 percent growth reading.
The growth in real wages was partly due to a 20.7 percent yearon-year jump in overtime pay as people worked extra hours compared to last year, when the government imposed a nationwide emergency to halt COVID-19 infections.
The leap in overtime pay was the biggest since comparable data became available in 2013, a government official said.
