Japan’s household spending falls for third straight month as weak consumption plagues growth
Expenditures on households have been slow to improve due to the stagnant wage environment in the country as firms are reluctant to raise salaries.
Household spending in Japan fell for the third straight month in November, down by 0.6% on a year-on-year basis, a performance worse than the 0.1% drop economists had expected.
The fall in November worsened from the 0.3% fall in October, data from the Ministry of Internal Affairs and Communications showed, adding to uncertainties on the country’s flaccid economic growth performance.
Household spending for November was down in segments such as food, fuel, and medical care but was up for categories such as housing, and education.
Household spending in Japan is a key contributor to the private consumption cluster which accounts for more than half of Japan’s Gross Domestic Product.
Expenditures on households have been slow to improve due to the stagnant wage environment in the country as firms are reluctant to raise salaries. A pick up in consumption is important to drive the country’s 2.0% inflation target. When consumers tighten their purse strings, firms will be less encouraged to raise the price of goods due to the cost-sensitive environment.
Japan’s core consumer prices eased in November compared to the previous month, and were below economists’ expectations as lower oil prices helped reduced energy costs.
The conditions in Japan spell out a weak economic growth environment amid depressed wages, however, economists are hoping for the country to rebound in its performance for the last quarter of the year.
Japan’s economic growth for the third quarter shrank 0.6% from the previous quarter, lower than the preliminary forecast of a 0.3% decline and economists’ expectations of a 0.5% fall, due partly to a slew of natural disasters that beleaguered the nation from July to September.
The fears of a global slowdown and signs of United States Federal Reserve putting a brake on its round of interest rates hikes have led to investors turning to safe-haven currencies such as the Japanese yen. This could also lead to a rise in the currency, making its goods more expensive to export.
Japan’s bank lending up 2.4% in December
Separate data from the Bank of Japan showed bank lending in the country rising by 2.4% in December, at ¥534.55 trillion. The increase follows the 2.1% rise in November.
Excluding trusts, bank lending rose 2.5% to ¥465.23 trillion, up from a 2.2% rise in November.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Live prices on most popular markets