Japan Household Spending Jumps by Double Digits in April

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Japanese household spending jumped by double-digits in April as consumers got a temporary reprieve from virus restrictions and the data got boosted by comparison with 2020’s pandemic-hit figures.

Spending surged 13% from a year earlier, the ministry of internal affairs reported Friday in figures that beat the median estimate from economists by a wide margin.

On a seasonally adjusted basis, outlays rose 0.1% from a month earlier, a third month of improvement that indicates a bedrock of consumer demand despite on-again-off-again restrictions to try to control the coronavirus.

Key Insights

• Spending could start to soften again in May and June amid a renewed state of emergency that’s been extended through the middle of this month. An earlier declaration of emergency during winter was a big factor behind last quarter’s economic contraction.
• “I see a good chance that the economy will contract again in the second quarter,” said economist Yuichi Kodama at Meiji Yasuda Research Institute. “It’s also true that pent-up demand has risen. Consumption can recover strongly once the emergency ends and the vaccination drive advances.”
• There are signs in recent days that the pace of vaccination is picking up after a slow and much-criticized start. As of June 2, Japan was administering close to 500,000 doses a day, a similar pace to the EU earlier this year.
• A ministry official said that, although household outlays in April had basically returned to 2019 levels, it was too simplistic to say consumption was back to pre-Covid levels because spending patterns have changed. Spending on durable goods is up, while that for entertainment and other services is down -- a predictable result given restrictions calling on bars and restaurants to close early.

What Bloomberg Economics Says...

“ The surprisingly big jump in Japan’s household spending in April probably won’t last -- disposable incomes aren’t rising fast enough to sustain it. Much of the year-on-year rise reflected last year’s low base. ”

--Yuki Masujima, economist

To read the full report, click here.

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