• Kyodo

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Japan’s household spending in fiscal 2020 fell a real 4.9% from a year earlier, posting the second-sharpest drop on record as the coronavirus pandemic forced many people to refrain from eating out and taking trips, government data showed Tuesday.

For March alone, meanwhile, average spending by households with two or more people rose a real 6.2% from a year earlier, the third-largest monthly increase since comparable data became available in January 2001, according to the Ministry of Internal Affairs and Communications.

Spending by households with two or more people averaged ¥276,167 ($2,500) per month in the fiscal year through March, decreasing for the second straight year.

The 4.9% drop followed the 5.1% decline marked in fiscal 2014 when personal consumption was battered by a consumption tax hike from 5% to 8% that April.

The latest data reflects the adverse impact of the virus that began to spread in the country in spring last year, prompting the government to declare a state of emergency twice in the reporting year and request people to stay at home and restaurants to shorten business hours.

The pandemic triggered the worst contraction on record for the world’s third-largest economy in the April-June period in 2020 when the first state of emergency was declared and nonessential businesses were asked to suspend operations.

Household spending sank a real 16.2% in May from a year earlier to log the steepest monthly drop on record, following an 11.1% dive in April.

“The coronavirus pandemic largely affected expenditures throughout the year, as people spent less on such activities as eating out and buying clothes due to stay-at-home requests,” a ministry official told reporters.

By category, outlays for dining and drinking at restaurants and bars plunged 29.8% from fiscal 2019, and those for clothing and shoes were down 19.7%. Spending on transportation plummeted 51.2%, while that on entertainment services including trips fell 30.6%.

On the other hand, so-called nest-dweller consumption grew, with expenditures on goods for entertainment use such as laptops and television sets rising 11.7% and utility bill payments up 4.6%.

Spending on meat and fish also rose 10.0% and 6.5%, respectively, as people bought more foodstuffs to cook at home.

The average monthly income of salaried households with at least two people in fiscal 2020 grew a real 3.5% to ¥607,586, up for the third consecutive year.

The income data reflected the impact of the government’s ¥100,000 cash handout program to all of Japan’s 126 million residents to mitigate the economic fallout from the pandemic.

As for March this year, average household spending stood at ¥309,800, up for the first time in four months, as the government’s second state of emergency over the pandemic was fully lifted late in the month. A 6.0% drop in March last year also helped boost the figure.

The second virus emergency issued in early January had suppressed household spending, which decreased by 6.1% in January and 6.6% in February.

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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