Japan household spending down 1.8% in June; Spending on durables in negative territory

July 31, 2008
By Ken Worsley

According to the Ministry of Internal Affairs and Communications, Japan’s household spending fell by 1.8% in June. Although the drop was smaller than had been generally forecasted, it does represent the fourth consecutive month in which household spending has fallen year-on-year.

In May we saw a fall of 3.2% after a drop of 2.2% in April and 1.6% in March. The Ministry also tells us that average household income declined 2.1% against June of 2007, falling to 737,166 yen. June income seems high when compared to other months due to the summer bonus being received in June. This year saw the average bonus falling for the first time in six years, though the decline was only 0.08%. A separate report from the Ministry of Health, Labor and Welfare showed overall wages falling 0.6% in June.

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

Furniture & Household Goods: 10,915 yen (+8.1%)
Education: 9,285 yen (+5.1%)
Transportation & communication: 38,051 yen (+4.5%)
Culture & recreation: 30,647 yen (+4.4%)

Clothing & footwear: 11,894 yen (-13.8%)
Medical care: 11,965 yen (-11.9%)
Housing: 17,265 yen (-4.1%)
Other: 65,148 yen (-3.8%)
Food: 66,918 yen (-3.6%)
Fuel, electric and water: 19,863 yen (-0.6%)

Last month, three categories had seen an increase while seven had declined. In June, we saw Culture & Recreation join the positive side. It’s also worth nothing that spending on energy and food continues to decline, even as massive price increases dominate the headlines. This is one phenomenon that we are not hearing about in the major media.

Here is our table tracking spending on major categories:

	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%
April	-1.16%	-0.10%	-6.56%	-2.35%
May	-1.94%	+2.68%	+8.26%	-7.64%
June	+1.08%	+1.31%	-1.92%	+0.75%

According to the data, disposable income also fell by roughly 4.3%. The bad news is that spending on durable and semi-durable goods fell back to negative territory, despite the fact that many of these items, especially in the realm of electronics and appliances, are actually falling in price. On the other hand, spending on services increased for the first time since January of this year.

Consumer spending accounts for about 55% of Japan’s GDP. On August 13 we will hear the preliminary GDP stats for the second quarter of 2008 from the Cabinet Office. How far down will the April, May and June declines in household spending drag 2Q GDP? We’ll just have to wait and see.

Filed Under Economic Reports, Household Spending