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Ongoing economic uncertainty exacerbated by the coronavirus crisis has sent Japanese household consumption spiraling. Monthly data released by the Statistics Bureau of Japan show that households of two or more people spent 16.2 percent less in May than one year prior.
The biggest losses in consumption spending happened in the areas of entertainment, education and services – sectors that were suffering as people stayed home and public gatherings were restricted.
Japan was the first major country to slide into a recession as of Q1 of 2020, since the country had already posted negative GDP growth figures in late 2019 prior to the start of the COVID-19 pandemic. Consumer spending was already weakening in late 2019, the September spike mostly due to a consumption tax hike that went into effect on Oct. 1.
Despite a coronavirus-related state of emergency having been lifted in May, insecure consumers were reluctant to start spending again. Now that a new state-of-emergency declaration is possible due to rising COVID-19 case numbers, consumer spending is unlikely to recover in the medium term.
This chart shows the year-over-year change in Japanese household consumption in households of two or more people, trend and inflation adjusted, between 2018 and 2020.
