Japan January household spending rises for first time in 6 months
Japanese household spending rose for the first time in six months in January on a yearon-year basis, largely because of weakness in the prior year, even as the fast spread of the COVID-19 Omicron variant likely weighed on consumption later in the month.
Rising energy prices in the wake of Russia’s invasion of Ukraine in late February are also threatening to choke consumer and business spending in the import-reliant economy. Analysts have trimmed their growth forecasts for Japan, with some projecting a contraction this quarter.
Household spending rose 6.9% in January from a year earlier, government data showed on Friday, versus economists’ median estimate of a 3.6% gain.
That followed a 0.2% drop in December.
The strong year-on-year reading reflected a 6.0% fall in January 2021 when COVID-19 state of emergency curbs were imposed, a government official told a media briefing.
Consumer spending on services such as restaurants, hotels and transport led the annual growth, while electricity and food items saw weaker demand in January, the data showed.
To combat the rapid spread of the Omicron coronavirus variant, Japan reinstated curbs on restaurant hours in about 70% of its areas later in the month.
Nationwide infections peaked in early February at a daily level of over 100,000 cases, but curbs have been extended in some areas including the capital Tokyo until later this month.
Month-on-month, spending contracted 1.2% in January on a seasonally adjusted basis, versus a forecast for a 3.0% loss in a Reuters poll and after a 0.1% growth in the previous month, the data showed.
The world’s third-largest economy posted annualised 4.6% growth in the final quarter of 2021 as pent-up consumer spending emerged following a decline in coronavirus cases, according to a revised official estimate this week.
But its recovery has been tepid and uneven compared with most other major economies, leaving the Bank of Japan with little choice but to continue super-loose monetary policy even as many of its peers begin dialling back emergency measures rolled out during the first year of the pandemic.
Economists expect Japan’s economy to remain flat or possibly contract in January-March, with persistently weak domestic demand and the war in Ukraine weighing on global growth.