Hope fades for Japan’s ‘revenge spending’ mania as inflation looms | Money

After lifting two years of on-and-off coronavirus restrictions in March, the government was counting on so-called “revenge spending,” pent-up demand triggering a frenzy that is boosting consumption and a moribund economy. —Photo Reuters

TOKYO, May 2 – Maiko Takahashi, a Japanese mother of three, has never been one to pinch pennies or accept gifts for her children, even though her single-earner family’s circumstances have always been quite modest.

But times have changed. These days, she has no problem with used clothes and her search for bargains and skimping on the most insignificant costs borders on obsession.

“I started paying close attention to advice from TV shows, like minimizing the number of times you open the fridge to save electricity,” said Takahashi, whose family of five lives in the suburbs. north of Tokyo.

“We started to feel the pinch in the usual way, so I made some adjustments.”

Takahashi’s behavior is mirrored by a growing number of consumers and underscores a worrying trend for Japan.

After lifting two years of on-and-off coronavirus restrictions in March, the government was counting on so-called “revenge spending,” pent-up demand triggering a madness that is driving consumption and a moribund economy, as documented. has seen the United States United States, China and a few other major economies.

But with soaring prices for energy, food and other livelihoods – exacerbated in recent months by a sharp drop in the yen and the war in Ukraine – those hopes are quickly fading.

Faced with the prospect of battling rising prices, Japan’s reputedly frugal consumers are tightening their belts even as they sit on the scraps of around 50 trillion yen (RM1.6 trillion), or the equivalent of 9% of the economy, in “forced” mode. savings,” as the Bank of Japan calls it, accumulated during the pandemic.

Some big companies have heeded the government’s call to raise wages, but gains of around 2% will be swallowed up by rising prices for everything from flour to nappies and beer, economists say.

In March, electricity prices in resource-poor Japan jumped 22% from a year earlier, the most in more than four decades.

The government recently updated its assessment of the economy for the first time in four months, citing an expected recovery in spending, but added a caveat that the outlook was clouded.

“The likelihood of a ‘revenge spending’ explosion is getting lower than expected,” one government official said in unusually frank remarks, noting that the outlook was particularly uncertain beyond the summer.

Final party

With more than 90% of consumers saying in the latest government survey that they expected everyday goods to become more expensive over the next 12 months, economists say it’s no surprise to see behavior like Takahashi’s.

As well as accepting used uniforms for her son entering kindergarten and venturing further afield in search of discounts, the stay-at-home mom said she’s switched to lower-cost private labels (PB) for mayonnaise, ketchup and other foods.

She is not alone. The share of so-called PB items for nationwide mayonnaise purchases rose to 22% in March from 18% a year earlier, according to market research firm Intage Inc. Supermarket giant Aeon Co 8267.T saw PB food sales jump 15% in the six months to February.

The ‘Golden Week’ holiday, which began on Friday, is the first in three years without Covid-19 restrictions, and the economy should see a dramatic improvement in spending, but it will likely be the peak of consumption this year, said Daiwa Toru Suehiro, senior securities economist.

“The full impact of rising costs will be felt in the July-September quarter and beyond, so Golden Week will likely be the last holiday of the year,” he said.

According to JTB Corp, Japan’s largest travel agency, the number of vacationers is expected to increase by about 70% from last year, but still a third less than pre-pandemic levels.

The fall of the yen to its lowest level in two decades would normally be a boon for inbound travellers, but Japan, fearing Covid, has kept its borders closed to tourists. In 2019, nearly 32 million foreign tourists contributed to the economy.

Meanwhile, the weak yen has hurt many businesses by raising input costs, making them just as cautious as consumers – and reluctant to raise wages.

“Prices keep going up and up for items we can’t live without, while wages are steady,” Takahashi said.

“I’m constantly racking my brains about what I can skimp on next.” —Reuters

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