Japan’s household spending down 1.6% in March - durables hit harder

April 30, 2008
By Ken Worsley

With food and fuel prices surging, Japan’s consumers have expressed their lowest degree of sentiment in nearly five years. In the face of sluggish wage growth, we have been expecting to see households begin to tighten their belts and rein in spending. After seeing increases of 2.2% in December and 3.6% in January, February’s household spending came out flat. In March, household spending decreased 1.6%, for the first drop reported since November of last year.

According to the Statistics Bureau, spending at households with two or more people came to 312,565. Income at households with a salaried worker as head of household came to 453,482 yen, which was up 0.6% from a year ago, while spending at workers’ households was at 342,868 yen, down 0.2% from last year.

Here’s a breakdown of spending per category, along with changes against March of last year:

Furniture & Household Goods: 8,940 yen (+6.6%)
Fuel, electric and water: 27,451 yen (+6.2%)
Culture & recreation: 31,807 yen (+3.9%)
Other: 79,986 yen (+1.9%)
Medical care: 13,121 yen (+0.3%)

Housing: 14,681 yen (-22.0%)
Transportation & communication: 39,754 yen (-9.5%)
Education: 13,596 yen (-9.3%)
Food: 69,164 yen (-0.9%)
Clothing & footwear: 14,035 yen (-0.8%)

Last month, we noted that a downturn in spending on durable and semi-durable goods, as well as spending on services, had finally been seen. Statistics from march show an even stronger decline:

	Goods and Services	Goods Only	Durable & Semi Durable Goods	Services Only
December	+2.34%	+0.99%	+.97%	+4.20%
January	+4.39%	+2.98%	+8.09%	+6.40%
February	+1.30%	+4.76%	-3.65%	-3.28%
March	-0.90%	-0.51%	-10.41%	-1.43%

As we can see, spending on durables and semi-durables took a massive hit in March. Although spending on services moved back above the 100,000 yen per household level in March and showed less of a decline year-on-year - as was predicted - it did still show a decline.

Will this trend continue? Many observers hold that Japan’s inflation is coming from the “wrong” places, and this data seems to back this up. With the reinstatement of the “temporary” gasoline tax (temporary for 34 years now) set to happen tomorrow and gasoline expected to climb back to the 160 yen per liter range, bringing the predictable level of “confusion” along with it, it seems unlikely that April’s figures (in expectation of the hike) or May’s will be substantially more encouraging.

At the same time, new Bank of Japan Governor Masaaki Shirakawa has said that he feels commodities may be nearing the peak of their price cycle…

Filed Under Consumer Spending, Economic Reports, Household Spending