Spending by Japanese families rises for the first time in four months. from Reuters

Reuters. As the mall reopens on May 28, 2020, in the midst of the coronavirus illness (COVID-19) outbreak in Chiba, Japan, a worker selling fish while wearing a face protection. Kim Kyung-Hoon/REUTERS/File Photo (This Aug 4 story corrects milestone to February from January in paragraph 2)

Through Daniel Leussink

(Reuters) TOKYO – As demand for travel services surged in June, Japan’s households boosted spending for the first time in four months, which is encouraging for the country’s hopes for a more comprehensive recovery.

According to official data released on Friday, spending increased 3.5% in June over the same month a year earlier. This was the first year-over-year increase since February as households increased their spending on hotel stays, package excursions, and outdoor equipment.

The data showed people spent less on fish and vegetables while also spending more on transportation, which was stronger than the median prediction for a 1.5% increase in a Reuters survey.

Even though the increase exceeded expectations, it was unlikely to allay concerns that Japan’s recovery would lag behind that of other developed nations like the United States, particularly after COVID-19 infections experienced a record rise in recent weeks.

Atsushi Takeda, head economist of Itochu Economic Research Institute, predicted that given the pandemic’s quick spread, some people might decide against traveling even in the absence of new restrictions.

Takeda continued, “For the time being, the impetus driving the rebound in travel will decelerate.
According to figures, spending on overnight stays increased in June by 4.5% over levels observed before the epidemic three years prior.

Separate data released on Friday revealed that real wages in Japan continued to fall in June, continuing a three-month streak of declines. This is concerning for households’ purchasing power because consumer prices increased more quickly than nominal wages, which experienced their strongest growth in four years.

Darren Tay, Japan economist at Capital Economics, stated that wage growth “remains sluggish after we account for the increases in working hours” and won’t be sufficient to cause the Bank of Japan to tighten monetary policy.

According to a private sector survey released earlier this week, demand for services shrank in July as a result of growing inflation and unpredictability around the state of the world economy.

As a result of a minor resurgence in consumer demand following the government’s lifting of COVID-19 limits, some economists have begun to caution that Japan’s economic recovery may decelerate in the current quarter after an anticipated expansion in April-June.

According to figures released on Friday, expenditure increased over the prior month by 1.5% on a seasonally adjusted basis.
This increase was a turnaround from the previous month’s severe 1.9% decrease and was more than the forecasted 0.2% increase.