Japan household spending falls

Japan's household spending fell in September as consumers remained cautious about the Covid-19 pandemic, backing broad consensus that the world's third-largest economy shrank in the third quarter but pointing to an improvement towards year-end.

The data underscored the need for policymakers to shore up domestic consumption as the global supply crunch hits the export-reliant economy.

Spending fell 1.9 per cent year-on-year in September, with the downturn easing slightly after a 3.0 per cent decrease in August, government data showed on Friday. It was also less severe than a median market forecast for a 3.9 per cent slide in a Reuters poll.

In seasonally adjusted month-on-month terms, spending jumped 5.0 per cent in September, marking the first increase in five months, beating expectations for 2.8 per cent growth.

"As the virus situation and foot traffic improved toward end of September, service spending such as entertainment and education recovered, catching up the earlier trend in goods spending," said Masato Koike, senior economist at Dai-ichi Life Research Institute.

Nationwide coronavirus cases decreased in September after hitting record levels in late August. The government lifted some Covid-19 curbs by end-September, but restrictions such as shorter restaurant hours and caps on large-scale events remained in place in Tokyo and other densely-populated cities until late October.

Many analysts expect the economy to have shrunk in the third quarter. The median forecast for July-September gross domestic product (GDP) growth stood at an annualised contraction of 0.8 per cent, Reuters poll of 18 economists showed on Friday.

Beyond carmakers, supply shortages in semiconductors and other components produced in coronavirus-hit Southeast Asia have caused a ripple effect in other parts of the Japanese economy. Growth in exports has slowed while private consumption stagnated because of slumps in car sales.