Business / Economy

Japan household spending fell 4.8% in warm December, weighed down by tax hike

Kyodo

Household spending fell for the third straight month in December on the continued impact of October’s consumption tax hike together with sluggish demand for winter items due to warm temperatures, government data showed Friday.

Spending by households with two or more people dropped 4.8 percent in real terms from a year earlier to ¥321,380 ($2,900), the Ministry of Internal Affairs and Communications said.

The decline accelerated from the 2.0 percent fall logged in the previous month, with a ministry official citing the continued effect of the Oct. 1 tax hike from 8 percent to 10 percent and the warm winter. In October, household spending fell 5.1 percent from a year earlier.

However, the official said that “momentum toward a pickup in spending has been maintained” following the sharp decline in demand due to the tax hike.

The government will monitor the impact of the ongoing outbreak of a new coronavirus that originated in China on consumption in Japan, the official added.

Warm temperatures dampened demand for items such as heating appliances, clothing and fuel. Outlays on furniture and home appliances decreased 13.3 percent, with those on clothing and footwear down 11.1 percent.

Health care expenditures — the only category that grew in the reporting month — rose 6.1 percent, partly due to an increase in influenza patients and flu shots.

After adjusting for inflation, the average monthly income of salaried households of at least two people, including winter bonuses, was down 1.9 percent from a year earlier to ¥1,074,143.

For the whole of 2019, average monthly spending by households with two or more members grew 0.9 percent from the previous year to ¥293,379 for the first rise in six years, boosted by last-minute demand before the tax increase.

Household spending is a key indicator of private consumption, which accounts for more than half of Japan’s gross domestic product.