Whether it’s the young or the old, Japanese consumers are spending less on fun, and that’s bad news for Abenomics.
With many pensioners on fixed incomes focused on buying the essentials, and a growing number of workers in their 20s and early 30s stuck in low-paying, non-regular jobs, fewer people have the money or the appetite to splurge on entertainment, travel and recreation.
This is holding down purchases of televisions, personal computers and package tours, in a sign of continuing weakness in consumption. It’s hurting Prime Minister Shinzo Abe’s efforts to revitalize the economy and the central bank’s campaign to boost inflation.
Over a quarter of Japan’s population is 65 or older -- that’s a bigger slice than in any other country -- and they’re finding it difficult to make ends meet as the government gradually raises the age at which people become eligible for pensions. This is exacerbating the tendency of older consumers to forgo discretionary spending and limit purchases to necessities like food and medical services.
Workers in their 20s and 30s, a typically fun-loving group that likes to splash money on non-essentials, also are spending less than previous generations. The reasons: Little wage growth and a growing number of young workers can’t get the kind of full-time and higher-paying positions their parents did, according to Hiroaki Muto, chief economist at Tokai Tokyo Research Center in Tokyo.
“Households, especially the young generation, are penny-pinching because they don’t expect to see wage increases in the future,” Muto said. “Japan’s economy is losing the benefits of the weak yen that was seen in the past several years, with corporate profits turning downward, so the prospects for wages don’t look bright.”
With consumption accounting for about 60 percent of Japan’s economy, subdued spending on discretionary items like travel and entertainment makes it harder to pull the nation out of its funk, according to Muto.
A key report on consumer prices for June is due at the end of this week, just hours before the Bank of Japan provides an updated outlook for growth and inflation, and announces any changes in monetary policy. Core consumer prices have fallen since March and economists expect a 0.4 percent decline for June.