• Kyodo

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Japan's average monthly spending by households in 2020 fell a real 5.3% from the previous year, marking the sharpest drop on record, as people refrained from going out due to the novel coronavirus pandemic, government data showed Friday.

The decline was the largest since comparable data became available in 2001, topping a 2.9% decrease logged in 2014 when the consumption tax was raised from 5% to 8% in April that year, according to the Internal Affairs and Communications Ministry.

Monthly spending by households with two or more people averaged ¥277,926 last year, it said. The figure had increased a real 0.9% in 2019 following a 0.4% fall in 2018.

By category, declines in outlays for culture and recreation contributed most to the overall drop, diving 18.1%, while spending on transportation and communication fell 8.6% as consumers shied away from face-to-face services.

Within the former category, spending on domestic and overseas package tours plunged 61.9% and 85.8%, respectively. Expenses on air travel tumbled 76.1% and train tickets 60.9%.

Expenditure on drinking at bars and elsewhere outside the home plummeted 53.9%, while spending on eating out was down 25.4%.

Meanwhile, spending on sanitary goods such as face masks soared 79.3%.

As more people have been spending time at home as well as working from home, outlays on video game consoles expanded 53.7% and expenditure on personal computers grew 30.7%.

The government declared its first state of emergency in some areas in April and later expanded it nationwide, urging people to refrain from nonessential outings and some businesses to close or close early. The emergency declaration was lifted the following month but the economy was significantly hurt.

Household spending showed a record drop of a real 16.2% from a year earlier in May.

Although the economy has picked up since, a resurgence in infections since mid-November has been clouding the outlook, with Prime Minister Yoshihide Suga declaring a second state of emergency last month for Tokyo and some other areas. It will be effective until March 7, having been extended by one month from the original end date.

Friday's data also showed that the average monthly income of salaried households with at least two people grew a real 4.0% to ¥609,535 in 2020, up for the second straight year and the biggest increase since 2001.

The higher income is due largely to the government's program that provided ¥100,000 in cash to all of Japan's 126 million residents to help cope with the economic fallout from the pandemic.

On prospects, Masato Koike, an economist at the Dai-ichi Life Research Institute, said household spending is expected to gradually recover in 2021 after slumping in the first quarter due to the ongoing state of emergency in Tokyo and some other big cities.

But he also said that spending on some services will remain weak even if the spread of the virus subsides. "For instance, expenditures on watching movies and theater performances might be replaced by online video streaming services," Koike said.

For December alone, average household spending stood at ¥315,007, down a real 0.6% from a year earlier for the first decrease in three months. But on a seasonally-adjusted basis, it rose 0.9% from November, following a 1.8% decrease in the previous month.

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

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