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Japan February consumer spending bounces - stimulus, tax still in focus

Published 03/28/2016, 10:19 PM
© Reuters. Shopper looks at items at a supermarket in Tokyo

By Stanley White

TOKYO (Reuters) - Japan's consumer spending in February rose for the first time in six months, official data showed on Tuesday, but the rise was partly because of the extra Leap Year day and did little to reduce pressure on the government to inject more economic stimulus.

The propensity to consume - a measure of households' willingness to spend rather than save - rose 3.9 points in February, the biggest gain in nine months.

Spending also rose because consumers bought mobile phone plans before government regulations stopped carriers from subsidising the entire cost of handsets, economists said.

"This is not the kind of spending you see when wages are improving," said Daiju Aoki, economist at UBS Securities.

"I am worried consumption could pull back in March because the data in February were driven by temporary factors."

Cigarette sales also rose before a price hike in April.

Labour demand remained at the highest in two decades but the jobless rate rose slightly in February, in a tentative sign of a pause in recent improvements in the labour market.

Worries about risks posed by weak emerging market economies are likely to fuel speculation that Japan's government will launch a new round of stimulus spending and delay a sales tax increase scheduled for next year.

"I expect consumer spending to rise further, but the gains will be very moderate given low demand for durable goods," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

"It would still make sense for the government to consider some form of stimulus, because it may want to act in response to concerns that the global economy is slowing."

Household spending rose 1.2 percent in February from a year earlier, government data showed on Tuesday.

That compared with the median forecast for a 1.5 percent annual decline.

Domestic consumption has mostly struggled since the government raised the sales tax in 2014.

A second sales tax hike is due in 2017, which is part of a two-step plan to raise more money for healthcare spending. Advisers close to the prime minister are calling for next year's tax hike to be shelved.

© Reuters. Shopper looks at items at a supermarket in Tokyo

The unemployment rate rose in February to 3.3 percent, from 3.2 percent in the previous month, and the jobs-applicants ratio held steady at a 24-year high of 1.28 in February.

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