Japan's real household spending posted its first rise in two months in March, up a solid 2.1% (the fifth in 12), after posting a slight 0.5% dip in February, despite the headwind of elevated costs for food and other necessities amid depressed real wages. The increase was led by higher private university tuition fees (due partly to a sample update), electricity bills (cold weather) and prices for computers (an operation system transfer to Windows 11 from 10 plus replacement demand for units bought during the pandemic lockdowns), which were partly offset by lower dental bills as well declines in some volatile factors, such as home repairs/maintenance and money sent to children studying away from home. It was much stronger than the median forecast of a 0.7% dip. Spending in February would have risen 1.8% if the boosting impact of the Lunar New Year in February 2024 were excluded.

The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, rose 2.7% on the year after dipping 0.8% the previous month, when overall spending slipped 0.5%.

On the month, real average expenditures by households with two or more people gained a seasonally adjusted 0.4% (vs. consensus -0.5%), after unexpectedly soaring 3.5% in February, partially rebounding from the 4.5% plunge the previous month.

The Consumption Trend Index, a key reference index compiled by the Ministry of Internal Affairs and Communications, slipped a real 1.1% on quarter after dipping 0.9% in October-December for the eighth straight decline, indicating sluggish private consumption in the Q1 GDP data due May 16.

The average real income of households with salaried workers fell 2.0% on year in March for the third straight drop after falling 2.3% in February. The average real income of the primary bread earners slid 0.5% after posting its first drop in five months (-0.1%) the previous month. Their spouses' average income slipped 5.2% after slumping 9.6% in February and marking its first drop in 12 months with a 1.5% dip in January. In nominal terms, the average household income grew 2.1%, little changed from 1.9% the previous month but the rate of increase was much slower than 3.5% in January and 7.2% in December, when yearend bonuses were paid.

In another set of data released by the labor ministry, total monthly average cash earnings per regular employee in Japan posted their 39th straight year-on-year rise, up a nominal 2.1% in March, after rising a revised 2.7% in February. Base wages rose 1.3% on year following a modest 1.3% rise the previous month. Real average wages slumped 2.1% for the third straight year-on-year decline after slipping 1.5% in February.

Japan's real household spending is forecast to have fallen 0.7% on year in March after posting a 0.5% dip in February, its first year-on-year drop in three months, as surging costs for food and other necessities kept consumers frugal amid depressed real wages. Spending in February would have risen 1.8% if the boosting impact of the Lunar New Year in February 2024 were excluded.

On the month, real average expenditures by households with two or more people are expected to fall a seasonally adjusted 0.5% after unexpectedly soaring 3.5% in February, partially rebounding from the 4.5% plunge the previous month.

Household Spending is an important gauge of personal consumption, which accounts for roughly 55 percent of Japan's gross domestic product. It is part of the monthly Family Income and Spending Report.

The report looks at spending of households and gives a picture of consumer spending. Increases in household spending are favorable for the Japanese economy because high consumer spending generally leads to higher levels of economic growth. Higher spending is also a sign of consumer optimism, as households confident in their future outlook will spend more. The preferred number is the change from the previous year. The data are part of the family income and expenditure survey which is released at the same time as the employment and unemployment data.