Japan household spending at nine-year high with Abe’s policy
Japan’s Prime Minister Shinzo Abe’s combination of fiscal spending, monetary stimulus and structural reforms, known as ‘Abenomics,’ is having a positive impact on the household sector. REUTERS photoJapan’s household spending surged 5.2 percent in March at the fastest pace in nine years in a sign that Prime Minister Shinzo Abe’s bold efforts to end two decades of stagnation are lifting consumer confidence and setting the stage for an economic revival.
A recent run of data has provided encouraging early hope that Abe’s push for aggressive fiscal and monetary policies to get the world’s third-largest economy motoring is having the desired effect.
Separate data also showed the jobless rate fell to the lowest in more than four years, providing another piece of evidence that domestic demand could play a critical role in underwriting economic growth in coming months.
Economists sure about exports picking up
While Japan’s industrial production rose less than expected in March due to tepid demand overseas, economists are confident that exports and factory output will eventually pick up due to a weaker yen.
On the whole, the figures suggest that expectations for Abe’s combination of fiscal spending, monetary stimulus and structural reforms, known as “Abenomics,” are having a positive impact on the household sector although the corporate sector is lagging behind.
“I expect the first quarter gross domestic product growth to exceed an annualized 2 percent, and if the corporate sector catches up with households, the pace of growth could accelerate,” said Yoshiki Shinke, senior economist, Dai-Ichi Life Research Institute.
“Recovery in exports has been slow and so has industrial output, but as a weak yen is expected to impact shipments from now on, exports and factory output will pick up in coming months.”
Abe’s policy mix has so far driven the yen to a four-year low against the dollar and sparked a 50 percent rally in Japanese share prices from November, which has helped buoy consumer sentiment.
Confidence in Japan received another boost on April 4 when the Bank of Japan launched its radical monetary expansion campaign, promising to inject about $1.4 trillion into the economy in less than two years.
Household spending at 5.2 percent
Household spending soared 5.2 percent in March from a year earlier in price-adjusted real terms, Ministry of Internal Affairs and Communications showed, as some individual investors cashed in on gains in stocks to increase spending on cars and home repairs.
That blew past the median estimate for a 1.8 percent annual increase and was the fastest gain since a 5.3 percent rise in the year to February 2004.
Such a big increase in spending is unlikely to be sustainable, and there are worries that wages have been slow to improve.
Economists have also warned in the past that the sample size for household spending is small and easily swayed by big ticket purchases. Still, they expect consumer spending will continue to expand at a more reasonable pace as individual investors cash in on stock gains.
The seasonally adjusted unemployment rate fell to 4.1 percent in March, the lowest since 4 percent in November 2008, figures from the Internal Affairs ministry showed.