Japan household spending posts surprise gain in Nov, rises for second month

[TOKYO] Japan's household spending unexpectedly rose for a second straight month in November, as consumer sentiment showed further signs of recovery from the damage inflicted by the coronavirus pandemic.

A one-month state of emergency for the Tokyo area approved by the government on Thursday is likely to hurt the recovery in domestic demand, with some analysts expecting the economy to fall into contraction in the first quarter of this year.

Household spending rose 1.1 per cent in November compared to the same month a year earlier, official data showed on Friday, beating a median forecast for a 1.5 per cent decline.

That marked the second month of expansion following a 1.9 per cent gain in October. Household spending slipped 1.8 per cent in November from the previous month, with demand for services such as travel tours being hurt by a resurgence in Covid-19 infections.

Household spending had already been under pressure throughout most of last year, due to the heavy hit of the Covid-19 crisis and after the government in October 2019 raised the country's nationwide sales tax.

The latest data is likely to provide some relief to policymakers facing a challenge in overcoming the health crisis and achieving the government's growth targets.

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The government last month raised its real economic growth forecast for the next fiscal year starting April to 4.0 per cent thanks to its latest stimulus package aimed at boosting an economic recovery, up from its previous forecast of 3.4 per cent growth.

The spending outlook is clouded by sluggishness in workers'wages, with data on Thursday showing inflation-adjusted real wages dropped for the ninth consecutive month in November, down 1.1 per cent compared to the same month a year earlier.

That data also showed overtime pay, a barometer of strength in corporate activity, in November contracted for the 15th straight month, down 10.3 per cent.

REUTERS