| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | -0.4% | -3.5% to 0.1% | -2.9% | 6.2% |
| Year over Year | 0.1% | -3.7% to 1.0% | -2.6% | 2.9% |
Highlights
Japan's real average household spending posted its first year-on-year drop in two months in December, down 2.6%, in payback for the previous month's jump in automobile purchases as well as a drop in another fluctuating item of home maintenance and repairs, but even the core measure of expenditures (excluding housing, motor vehicles and remittance) fell 1.5%, indicating that consumers remain frugal.The decrease followed an unexpected 2.9% rebound in November, when a routine shuffle of household samples revved up vehicle purchases.
The pullback in autos was expected but the 2.6% decline was much weaker than the median forecast of being nearly flat (+0.1%). However, a half of the economists polled had predicted a drop (-3.7%, -2.3% and -0.1%), so the decrease in this small-sampled indicator is not surprising. On the month, real average expenditures by households with two or more people slumped 2.9% in December marking the sixth decline in 12 months after surging 6.2% the previous month.
For a clue to overall economic health, the consumption trend index for all households showed a real 3.2% plunge on quarter in the October-December period after rebounding 1.1% in July-September and posting modest drops in the previous four quarters. This indicates that private consumption is resilient in the face of elevated costs of daily necessities but remains sluggish in the Q4 GDP data due on Feb. 16.
The economy is forecast to post a slight 0.4% rebound on quarter, or an annualized 1.7%, in the October-December quarter after having posted its first contraction in six quarters in Q3, down 0.6% q/q (2.3% annualized). Domestic demand is expected to add 0.4 percentage point to the Q4 GDP vs. -0.4 point in Q3 while net exports (exports minus imports) are seen lifting total domestic output by 0.1 point vs. -0.2 point previously. Private consumption is projected to be resilient, rising 0.2% q/q for a seventh straight gain, after growing at the same pace in Q3.
Looking at the whole of 2025, real average expenditures by households with two or more people rebounded a modest 0.9% on the year, marking the first gain in three years vs. -1.1% in 2024, -2.6% in 2023, +1.2% in 2022, +0.7% in 2021 and -5.3% in 2020.
In the bigger picture, elevated costs of living are keeping consumers frugal, limiting growth in overall consumption. Spending on foodstuffs and clothing dipped in December after recent gains. Many households also continue to trim the funds sent to kids studying away from home and the gift money given at weddings and funerals. There is also a widespread move to switch more affordable mobile communications plans.
Details:
Japan Dec real household spending -2.6% y/y (Nov +2.9%), 1st fall in 2 months; median forecast +0.1% (range: -3.7% to +1.0%)
Japan Dec real household spending s.a. -2.9% m/m (Nov +6.2%), 1st fall in 2 months; median forecast -0.4% (range: -3.5% to +0.1%)
Japan Q4 consumption trend index real s.a. -3.2% q/q vs. +1.1% in Q3, indicating private consumption remains sluggish in Q4 GDP due Feb 16
Japan Dec real core household spending (ex-housing, vehicles, gift money) -1.5% y/y vs. -1.8% in Nov when overall spending rose 2.9%
Japan Dec household spending y/y fall led by autos, equipment, donations
Japan Dec household spending y/y drop in payback for auto purchases in Nov (expected), also due to volatile items of home maintenance/repairs
Japan Dec data shows households still cautious, trimming spending on foodstuffs, clothing after recent gains
Japan Dec average real household income 0.0% y/y (Nov +2.2%); +2.4% in nominal terms (Nov +1.0%)
Japan 2025 average real household spending +0.9% y/y vs. -1.1% in 2024, -2.6% in 2023, +1.2% in 2022, +0.7% in 2021, -5.3% in 2020
Market Consensus Before Announcement
Japan’s real household spending is expected to edge up 0.1 percent from a year earlier in December, after unexpectedly rising 2.9 percent the previous month, driven by a surge in automobile purchases.
November household spending of two or more people was also lifted by strong outlays on durable goods, while colder weather boosted demand for winter clothing. In addition, spending rose by a higher number of weekends and public holidays during the month.
December household spending is seen rising modestly, likely underpinned by
continued demand for automobiles and related purchases. Credit card spending, which tends to move in tandem with real household expenditure, increased and is expected to support the overall figures.
Still, spending is expected to be weighed down by slower nationwide supermarket
sales in December following gains the previous month. Softer inbound demand
appeared to undermine department store sales, while growth in convenience store
sales decelerated during the month.
On a month-on-month basis, household spending is expected to fall for the first time in two months in December, edging down 0.4 percent after jumping 6.2 percent a month earlier.
Definition
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.
Description
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.