Japan’s May growth in household spending slowed compared to the previous month, Reuters reported

By Daniel Leussink

TOKYO (Reuters) -Japan’s household spending rose at a double-digit rate in May despite consumers buying cars and mobile phones, but the pace of growth slowed from the previous month as a new wave of COVID-19 infections weighed on consumer confidence.

The Japanese economy is struggling to shake the trail of the coronavirus pandemic after the government imposed “almost emergency” measures in Tokyo and several other important areas to prevent the resurgence of infections.

Household spending rose 11.6% year-on-year in May, after a 13.0% rise in earnings in the third month of April, government figures showed on Tuesday. The Reuters poll was 10.9% stronger than the market forecast.

Earnings plummeted as a result of the backlash from last year’s sinking, when pandemics and national emergencies shut down businesses and disrupted daily life.

Excluding high-income items such as housing, cars and gifts, household spending rose by 8.9% year-on-year but fell by 6.5% two years earlier – a sign that recovery is taking time to bed.

“It will be difficult to recover service costs if economic activity is not completely removed from the limits,” said Takumi Tsunoda, chief economist at the Shinkin Central Bank Research Institute.

“While the spread of vaccines is happening faster than expected, its (economic) impact may not be seen until September or later.”

Data from the Ministry of the Interior and Communications showed that the month-on-month figure contracted by 2.1% compared to the projected 3.7% decrease.

May spending fell less than expected from the previous month, with weak car sales in June – partly due to the impact of semiconductors on supply shortages – likely to weigh on last month’s spending, Tsunoda said.

May spending growth is unlikely to dampen Japan with a slowdown in recoveries in other major economies, such as the United States, the fastest-growing pace of concerns the International Monetary Fund expects to grow 7.0% this year.

Another combination of increased risk of infection and late vaccination in the nation has contaminated consumer and business confidence.

Separate data on Tuesday showed that real inflation-adjusted wages in May had the largest year-on-year increase since June 2018, partly due to the year-on-year increase in overtime pay.

Some analysts fear that the Japanese economy could fall into recession in the second quarter, defined as a two-quarter straight contraction, as consumer and business confidence was successful in halting measures to curb the rise in coronavirus infections.

On Monday, a survey of private companies showed that activity in the Japanese services sector had declined for the 17th consecutive month in June.