Japanese shoppers open their wallets, raising hopes for sustained revival

Aug 16, 2017 | News On Japan

Aug 16, 2017 (Japan Today) - Japan's cautious consumers are starting to loosen up, spending more on cars and home appliances and offering hope that domestic demand - and not just exports - will be strong enough to reflate an economy that has been sluggish for many years.

The tightest labor market since the 1970s seems to be a playing a role. Temporary and part-time workers are getting paid more to help fill shifts, and that is helping lift sales.

Consumption was the main driver behind Japan's second-quarter economic growth, which expanded at an annualized 4%, gross domestic product data released on Monday showed, the strongest in more than two years and much higher than the growth achieved by the United States and the European Union.

"I ended a big project today, and I wanted to give a present to my girlfriend who has always been supportive, so I bought her a Tiffany necklace," said Yusuke Kawashima, a 29-year-old freelance software programmer in Tokyo. "Quite a few of my friends have said they either had a pay raise or received a large bonus, so I think they'll be spending as well."

Wage hikes for part-time workers in Japan have accelerated, rising to 2.3% year-on-year in May from 0.7% in August 2016. Salaries for full-time workers, though, have been little changed.

Some of Abe's structural reforms, such as narrowing the wage gap between contractors and full-time employees doing the same work, raising the minimum wage, and encouraging people to move to better-paying jobs, are also starting to pay off.

One major concern is that Japan's consumer spending revival has yet to translate into faster inflation; core consumer prices rose a meager 0.4% in the year to June and inflation expectations remain weak.

The United States and Europe are also struggling to generate inflation despite improving growth, but Japan's case is peculiar because of the decades of deflation and stagnation following the collapse of the bubble economy in the early 1990s.

That's produced a deflationary mindset among many people that cannot easily be changed.

And as the country's population shrinks and ages, saving for the future has become a top priority for many.

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