Intellasia East Asia News – Japan could get boost if consumers spend $180bn saved during pandemic

Now that Japan has lifted its latest state of emergency over the coronavirus, the economy could get a major boost if shoppers splash out with the extra $180 billion they saved while on lockdowns.

In places like the US and the UK, pent-up consumer demand helped fuel strong recoveries, but whether the flood gates will open quite as wide in Japan remains to be seen.

Japanese households are known for putting their money away and the country’s seniors, in particular, tend to be ultra careful about spending because they worry about outliving their savings.

Still, people like 80-year-old Akira Yamada are itching to get out after more than 18 months in quasi-confinement.

“I’m ready to spend some,” he said by phone from his house in Saga city, southwestern Japan. “I’m really looking forward to finally being able to eat out with people.”

What consumers choose to do as Japan lifts its fourth state of emergency on Friday is likely to determine the strength of the recovery that incoming prime minister Fumio Kishida inherits, especially given that exports are slowing amid global supply chain problems.

Kishida has put increasing family incomes at the centre of his economic agenda.

“I expect a fairly big boost from consumer spending,” said economist Tatsushi Shikano at Mitsubishi UFJ Morgan Stanley. “With a new fiscal spending expected from Kishida, there is even an upside risk for Japan’s economy.”

Japan’s households socked away a tonne during the pandemic, with their financial assets hitting a record at the end of June. So-called “forced savings”, money that couldn’t be spent because of restrictions on activity, climbed to 20 trillion yen, or $180bn, amid the crisis, according to the Bank of Japan.

“I’m ready to spend some,” he said by phone from his house in Saga city, southwestern Japan. “I’m really looking forward to finally being able to eat out with people.”

What consumers choose to do as Japan lifts its fourth state of emergency on Friday is likely to determine the strength of the recovery that incoming prime minister Fumio Kishida inherits, especially given that exports are slowing amid global supply chain problems.

“I expect a fairly big boost from consumer spending,” said economist Tatsushi Shikano at Mitsubishi UFJ Morgan Stanley. “With a new fiscal spending expected from Kishida, there is even an upside risk for Japan’s economy.”

Japan’s households socked away a tonne during the pandemic, with their financial assets hitting a record at the end of June. So-called “forced savings”, money that couldn’t be spent because of restrictions on activity, climbed to 20 trillion yen, or $180bn, amid the crisis, according to the Bank of Japan.

An inoculation rate of around 60 per cent has helped bring down infection rates and allowed authorities to lift the emergency, although restaurants are still being asked to close by 9pm.

A longer-term impediment to a consumer revival, though, is Japan’s track record of weak wage growth, which has made people wary.

“Consumer spending will rise in the short term, which is good for the economy, but I don’t expect that to continue,” said economist Masamichi Adachi at UBS Securities. “Cautious Japanese consumers won’t keep spending generously.”

https://www.thenationalnews.com/business/economy/2021/10/02/japan-could-get-boost-if-consumers-spend-180bn-saved-during-pandemic/

 

Category: Japan