Japan ‘s spending slump eases as the economy re-opens, coronavirus cloud outlook

Japan’s household spending dropped at a much slower pace in June than in the previous month, with the economy re-opening from lockdown steps to curb the coronavirus pandemic, giving some hope of a modest recovery later this year. But the recovery was largely driven by government-wide cash transfers to households that were spent on big ticket items such as television sets, personal computers, and sofas.

That cast some doubt on the sustainability of the rebound, especially as rising Covid-19 infections nationwide forced the government to demand that citizens hold back on unnecessary travel and work from home as much as they did. Household spending in June decreased by 1.2 per cent from the previous year, according to government data on Friday, down from a median market forecast of 7.5 per cent.

It followed a record 16.2% drop in May, when consumers were still listening to calls from the authorities to stay home to stem the pandemic. These emergency measures were lifted at the end of May. The pandemic consequences have pushed Japan deeper into recession, hitting an economy that is already reeling from the consumption and export damage caused by last year’s tax hike and slumping overseas demand.