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.

Customers shopping for groceries in Japan Source: Bloomberg

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.


IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
China 300
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.