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Japan Feb consumer spending bounces back, outlook uncertain

Tuesday, March 29, 2016 - 08:19

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Japanese consumer spending in February rose for the first time in six months, but slowing wage growth and worries about overseas economies means the government remains under pressure to come up with stimulus to boost the economy.

[TOKYO] Japanese consumer spending in February rose for the first time in six months, but slowing wage growth and worries about overseas economies means the government remains under pressure to come up with stimulus to boost the economy.

Labour demand remained at the highest in two decades but the jobless rate rose slightly in February, in a tentative sign of a pause in recent improvements in the labour market.

Slowing wage growth and worries about risks posed by weak emerging market economies is likely to fuel speculation that Japan's government will launch a new round of stimulus spending and delay a sales tax increase scheduled for next year.

"I expect consumer spending to rise further, but the gains will be very moderate given low demand for durable goods," said Hidenobu Tokuda, senior economist at Mizuho Research Institute. "It would still make sense for the government to consider some form of stimulus, because it may want to act in response to concerns that the global economy is slowing."

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Japanese household spending rose 1.2 per cent in February from a year earlier in price-adjusted real terms, the government data showed on Tuesday.

Increased spending on medical care, cars, dining out and mobile phone data plans drove gains in household spending, the data showed.

The rise compared with the median forecast for a 1.5 per cent annual decline and followed a 3.1 per cent annual decline in January.

Separate data showed retail sales rose 0.5 per cent in February from a year earlier, less than the median forecast for a 1.7 per cent annual increase.

The seasonally adjusted unemployment rate rose in February to 3.3 per cent, from 3.2 per cent in the previous month. The median estimate was for the jobless rate to remain unchanged.

The jobs-applicants held steady at a 24-year high of 1.28 in February, less than the median estimate for a rise to 1.29, separate data by the labour ministry showed.

Domestic consumption has mostly struggled since the government raised the sales tax in 2014.

A second sales tax hike is due in 2017, which is part of a two-step plan to raise more money for healthcare spending.

Some prominent overseas economists have recently joined advisers close to the prime minister in calling for next year's tax hike to be shelved in favour of more stimulus spending.

Companies raised wages an average 2.1 per cent at this year's annual spring salary negotiations, Japanese Trade Union Confederation data show, less than the 2.4 per cent average increase last year, a negative factor for the consumption outlook.

REUTERS

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