| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 0.0% | -1.4% to 1.5% | -1.3% | 1.5% |
| Year over Year | -1.7% | -4.3% to 1.6% | -2.9% | -1.8% |
Highlights
Japan's real average household spending remained weak, marking a fourth straight year-on-year decline, down 2.9% in March (a nominal 1.3%) after a 1.8% dip in February, but the sharper-than-expected slump was exaggerated by a volatile category of vehicles and related goods, which pushed down overall spending by 2.82 percentage points. Excluding home maintenance and repairs and other volatile items like vehicles and gift money, the core measure fell by a smaller 1.3% (up 0.3% in nominal terms) after falling 2.3% in the prior month.
Overall, consumers have been cautious about spending beyond necessities amid low growth in real wages, trimming expenditures on eating out and gift money at weddings, while they have shelled out higher dental bills in recent months. There is also a widespread move to switch to more affordable mobile communications plans.
In the January-March quarter, real average expenditures by households with two or more people recorded a slight 0.7% rebound on quarter in the consumption trend index after tanking 3.2% in October-December and rising 1.3% previously. The CTI slipped 1.3% on the month in March vs. +0.9% in February and +0.3% in January. This indicates that private consumption will be sluggish but somewhat resilient in the preliminary Q1 GDP data due on May 19.
The economy is forecast to have grown 0.5% on quarter, or an annualized 1.7%, in Q1 for the second straight growth after rising 0.3% (+1.3%) in Q4 and falling 0.7% (-2.6%) in Q3, the first contraction in six quarters. Consumer spending, which accounts for about 55% of total domestic output, is seen up 0.2% on quarter (+0.3% in Q4) for an eighth consecutive increase. Q1 GDP expansion is expected to be also led by solid demand for business investment in artificial intelligence, a rebound in public works spending and a slight gain in net exports.
The supply side data showed a slightly different picture late last month. Retail sales marked a modest 1.7% rise on year in March, propped up by demand for spring clothing at department stores, a pickup in auto demand and usual suspects of drugs/cosmetics, after slipping 0.4% in February in payback for a high level of auto sales in February 2025 and a 10th straight drop in fuel sales. Government subsidies continued depressing fuel prices in March.
Department store sales posted the third straight year-on-year increase in March, up 3.2%, after rising 1.6% in February, led by solid demand for spring clothing and high-end watches and jewelries. Sales to visitors from overseas marked their first gain in five months as the weak yen boosted their purchasing power. Chinese tourists continued boycotting Japan over bilateral diplomatic rows while spending by visitors from Taiwan, South Korea, Southeast Asia and the United States more than offset the impact of a 20% drop in sales to visitors from China.
Details:
Japan Mar real household spending -2.9% y/y (Feb -1.8%), 4th straight fall; median forecast -1.7% (range: -4.3% to +1.6%)
Japan Mar real household spending s/a -1.3% m/m (Feb +1.5%), 1st fall in 2 months; median forecast 0.0% (range: -1.4% to +0.5%)
Japan Q1 consumption trend index real s/a +0.7% q/q vs. -3.2% in Q4, indicating private consumption sluggish but resilient in Q1 GDP due May 19
Japan Mar real core household spending (ex-housing, vehicles, gift money) -1.3% y/y vs. -2.3% in Feb when overall spending fell 1.8%
Japan Mar household spending y/y fall led by decline in auto purchase, gift money, beer
Japan Mar data shows households still cautious, trimming spending on clothing, gift money, eating out; dental bills, hotel fees up
Japan Mar average real household income +4.7% y/y (Feb +1.6%); +6.4% in nominal terms (Feb +3.0%)
Market Consensus Before Announcement
Japan’s real household spending is seen falling for a fourth straight month on the year in March, as higher energy prices and uncertainty over future supplies amid persistent Middle East tensions weighed on consumer spending behavior.
Spending by households with two or more persons is forecast to fall 1.7 percent on the year in March, following a 1.8 percent decline in February. In February, transportation and communication spending, including automobile-related expenses, dropped 5.9 percent in real terms, while food spending, including fish and seafood as well as oils and seasonings, fell 0.5 percent.
Household spending in March is seen dragged down by a decline in supermarket sales after an increase in February. New passenger car registrations are also expected to fall, although the pace of decline is likely to moderate from the previous month.
Spending on both goods and services, based on credit card usage data, is also seen decreasing in March, although department store sales, convenience store sales and overall retail sales data showed some improvement.
Reflecting these trends, household spending on a month-on-month basis is expected to be flat in March after rising 1.5 percent in February.
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.