— Real Household Spending Posts First Y/Y Drop in 7 Months>}

TOKYO (MNI) – Japan’s average household spending unexpectedly fell
by a real 0.5% from a year earlier to Y261,163 in February, on declines
in purchases of cars, gasoline, medical care and tuition, data from the
Ministry of Internal Affairs and Communications showed Tuesday.

Household spending posted the first year-on-year drop in seven
months. February’s result came in much weaker than the consensus call
for a rise of 1.5%.

The drop in February followed gains of 1.7% in January, 2.1% in
December, 2.2% in November, 1.6% in October, 1.0% in September and 2.6%
in August.

The May 2009 rise was the first y/y gain in real terms in 16
months.

Real spending rose in six out of the 10 categories in February:
furniture and household utensils (+18.2%), home maintenance and repair
(+1.8%), clothing and footwear (+6.1%), culture and recreation (+1.7%),
food (+0.6%) and utilities (+0.2%).

However, these gains were more than offset by lower spending in
education (-6.7%), transportation and communication including
automobiles (-6.3%), other consumption expenditures including funeral
and other services (-1.6%) and medical care (-0.2%).

Tax breaks for buying low-emission vehicles have supported demand
for automobiles, but in February the transportation and communication
category posted the first y/y drop in three months following gains
of 11.3% in January and 10.8% in December.

Meanwhile, the government’s reward program for buying greener
consumer electronics has continued to prop up demand for certain models
of TVs, refrigerators and air conditioners/heaters.

Solid demand for TVs and video recorders was seen for the fifth
straight month in spending on “culture and recreation,” although the
rate of growth slowed to +1.7% y/y in February from +3.1% in January,
+4.8% in December and +6.9% in November.

Demand for home durable goods (refrigerators and air conditioners)
was reflected in spending on “furniture and household utensils,” which
also posted the fifth consecutive y/y rise, with the pace of increase
accelerating to +18.2% in February from +10.2% in January and +5.6% in
December.

The average real income of salaried workers’ households rose 1.3%
y/y in February to Y464,866 vs. drops of 0.5% in January and 4.8% in
December. It posted the first year-on-year rise in seven months in
inflation adjusted terms but was still flat in nominal terms.

Real disposable income in the average salaried workers’ household
rose 1.5% in February to Y391,042 vs. a 0.4% decline in January, showing
the first y/y rise in nine months in real terms (+0.2% in nominal
terms).

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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