"Spending slashed in Japan" - whose spending, exactly ? A look at the results of attempts at deflationary policy

Jurriaan Bendien bendien at tomaatnet.nl
Sat Aug 30 08:20:42 MDT 2003

Spending slashed as incomes fall again

Wage earners tightened their belts by a mind-boggling 6% in July. Spending
by wage-earner households fell 6 percent in July in real terms from a year
earlier for the largest monthly contraction in nine years and reversing the
previous month's 0.4 percent increase, the government said Friday. Average
monthly household spending came to 326,772 yen, the Public Management, Home
Affairs, Posts and Telecommunications Ministry said in a preliminary report.

Their average monthly income, including summer bonuses, dropped 1.1 percent
in real terms to 575,142 yen, falling for the 16th consecutive month.
Disposable income declined a real 1.7 percent to 479,433 yen. Personal
spending accounts for about 60 percent of Japan's gross domestic product,
and wage-earning households' outlays make up 60 percent of all household

The ministry cited substantial declines in spending on housing improvements
and ceremonial occasions, such as marriages and funerals, as the two largest
factors for the decline in overall spending. "Those two one-time factors
combined to contribute to nearly a half of the 6 percent fall, which appears
to be a fairly big margin," a ministry spokesman said. The margin of decline
is the largest since a 6.9 percent fall recorded in March 1994. Lower
spending on housing renovation led to a real 16.5 percent decrease from a
year earlier to 20,762 yen in overall housing-related spending.

Spending on transportation and telecommunications dropped 6.8 percent in
real terms to 45,886 yen, and outlays on education fell by the same margin,
to 14,101 yen. Spending on food, including alcoholic beverages and fruit,
shrank 1.4 percent to 71,770 yen as the unseasonably low temperatures in
July quashed spending on beer and other cold drinks, according to the
ministry. Spending decreased by 17.8 percent on beer, by 13.4 percent on
"happoshu" low-malt beer, and by 13.6 percent on tea-type soft drinks, it
said. Among other items, spending on package tours, which are included in
the education and entertainment category, fell 26.2 percent in nominal
terms, compared with a 0.4 percent decline the previous month. Overall
spending on education and entertainment items edged down 0.2 percent in real
terms to 36,298 yen. Health and medical care was among the few categories
where spending increased, rising 6.3 percent to 12,471 yen.

The key gauge of consumer prices in Tokyo edged down 0.3 percent in August
from a year earlier for a record 47 consecutive months of decline, the
government said in a preliminary report Friday. The consumer price index for
Tokyo's 23 wards, excluding prices of perishable foods, registered 97.7
against the base of 100 set in 2000, the Public Management, Home Affairs,
Posts and Telecommunications Ministry said. The index was up 0.3 percent
from July, however. Consumer prices in Tokyo are a leading indicator of
prices across Japan. The margin of decline from year-before levels for the
core CPI, which marked successive declines of 0.4 percent for four straight
months through July, is the smallest since November 1999, when the index
fell an identical 0.3 percent.

The Japan Times: Aug. 30, 2003

Source: http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20030830a1.htm

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