Japan’s Household Spending Rises But Wages Drop

Japanese households increased spending but real wages continued to fall in January, government data showed Friday, painting a mixed picture of the economy.

Spending by households with two or more people gained a real 1.9% from a year ago in January to 289,703 yen ($2,720), according to the ministry of internal affairs and communications. The ministry changed how it compiles spending figures starting January, Kyodo reported.

Japan’s real, or inflation-adjusted average wages, fell 0.9% in January from a year earlier for the second consecutive month of decline, as a rise in prices outpaced a nominal wage increase, according to the ministry of health, labor and welfare.

The figure came a day after data showed Japan’s economy grew at a much faster real annual rate of 1.6% in October-December as domestic demand—private consumption and capital expenditure—strengthened.

Economists say robust wage growth is necessary for economic growth to pick up pace further at a time when Japan is still struggling to break free from deflation.

Japanese consumers have been gradually loosening their purse strings but cold waves and heavy snow that hit parts of Japan in early 2018 may have cooled sentiment.

Such poor weather conditions boosted expenditure on electricity and kerosene for heating and demand for medical products such as masks due to the spread of flu. Consumers reduced spending on some vegetables, amid higher fresh food prices.

The consumption trend index, released for the first time, stood at 96.1 against the base of 100 in 2015. It marked a real 0.8% fall from a year ago. The internal affairs ministry compiled the new index to gauge wider consumption activity among households.

Average total cash earnings per worker, including base and overtime pay, was up 0.7% from a year earlier to 271,640 yen, marking the sixth consecutive monthly rise, the labor ministry said.

Average base pay and other scheduled wages climbed 0.2%, while unscheduled wages, including overtime pay, were unchanged from a year earlier.