According to Tuesday’s data, Japan’s household spending recorded its biggest monthly gain in 18 months in March. Consumer demand recovered strongly from the heavy blow it took from the worsening impact of the COVID-19 pandemic last year.
Still, an extension of new state of emergency restrictions and slow vaccine rollouts cloud the prospect for the world’s third-biggest economy. Moreover, it was likely to keep spending under pressure.
Government data revealed that household spending rose 6.2% in March from a year earlier after a 6.6% slump in February. Notably, it was stronger than a median market forecast for a 1.5% gain in a Reuters poll.
The jump posted the biggest gain since September 2019 and was the first increase in four months.
According to a government official, the overall spending gain was mainly due to a recovery from last year’s contraction, when the health crisis wreaked havoc on economic activity.
The month-on-month figures were also positive, recording a 7.2% surge compared with a forecast of a 2.1% rise.
Demand for travel services recovered strongly compared to a year earlier
Takeshi Minami, a chief economist at Norinchukin Research Institute, reported that the number of infections rose rapidly in April, so there will likely be a slump again. He added that that was likely to be followed by a moderate pickup in spending in May and June.
Another essential thing to mention is that demand for travel services recovered strongly compared to a year earlier. However, the data revealed that it remained relatively low as COVID-19 continued to weigh.
Moreover, the data was unlikely to dispel worries that Japan’s economic recovery lags compared to other leading economies after the government last week expanded emergency curbs to stop the latest surge in coronavirus cases.
Remarkably, the Japanese government has already offered huge monetary and fiscal stimulus to help the economy withstand a blow to global trade from the health crisis.