Japan household spending falls for 4th straight month, coronavirus impact looms

[TOKYO] Japanese household spending dropped for the fourth straight month in January, reflecting growing strains in domestic demand even before fully factoring in the coronavirus' economic impact.

The world's third-largest economy is struggling to offset a pullback in output and exports amid the global health crisis, which threatens to push it into recession.

Household spending fell 3.9 per cent in January from a year earlier, government data showed on Friday, largely in line with a median forecast for a 4.0 per cent decline.

That marked the longest stretch of contraction since a five-month run to June 2018, a government official said. Household spending also slipped 1.6 per cent in January from the previous month.

If Japan slips into recession - two consecutive quarters of decline - in the current quarter through March, it will be its first in nearly five years.

Household spending had already been under pressure in recent months, after the government in October pushed ahead with the country's first sales tax rise since April 2014.

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The coronavirus crisis now threatens to quash the possibility of the domestic-led recovery many policymakers had hoped for.

The Bank of Japan may take steps this month to ensure companies hit by the virus do not face a financial squeeze before the March end of the current fiscal year, sources familiar with the central bank's thinking said on Thursday.

BOJ Governor Haruhiko Kuroda said earlier this week the virus could inflict serious damage on the economy, indicating a growing concern among BOJ policymakers over the deepening cost of the crisis.

Sluggish wage recovery in recent months has also fuelled worries about private spending.

Inflation-adjusted real wages rose for the first time in four months January, gaining 0.7 per cent, labour ministry data showed on Friday, following a downwardly revised 1.1 per cent drop in the previous month.

Japan's economy shrank at the fastest pace in almost six years in the December quarter as the sales tax hike hit consumer and business spending, data showed.

The Cabinet Office will publish revised GDP data on March 9 at 8.50am Japan time (2350 GMT, March 8).

A preliminary US-China trade deal had raised hopes globally of a let-up in the pressure businesses face worldwide, in particular export-reliant nations like Japan.

But uncertainty over how the spread of the virus could affect global and Chinese economic growth has now cast a shadow on the BOJ's rosy economic projections.

The central bank still expects the economy to recover this year, holding hopes that global growth will rebound around mid-year and provide a lift to exports.

REUTERS