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Japanese household spending likely to have slowed amid virus turmoil

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Japanese household spending likely to have slowed amid virus turmoil

japan household spending
Photo: Reuters

The Japanese government will release household spending data today. As a recent poll indicated that February household spending has declined by 3.9% from the previous year.

Consumer spending patterns in Japan have shifted due to COVID-19 restrictions. Stay-at-home measures have prompted a decline in consumption of most products except food items. This pattern can be expected to continue in the current quarter if home-quarantining and social distancing measures are prolonged. Supply-side logistical disruptions have likely led to a 2.7% decline in machinery and capital expenditure in February.

A consequence of falling private demand is potential deflation in the economy. Falling prices could further dampen output in the medium term. Tokyo is therefore aiming to boost output demand and supply in the economy to prevent deflation in the medium term. It has touted its plans for a $149 billion stimulus package to achieve these outcomes.

Tokyo is also expected to issue bonds to the Bank of Japan to float money in the economy. The package will likely include cash pay-outs to households, financial institutions and stressed small-scale firms. Directly addressing households’ purchasing capacity and small suppliers’ production capacity in the immediate future, the government hopes to prevent a sustained fall in output.

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