Report

June Spending, Income Drops Again, Worse than 1997

posted by Richard Katz on July 30, 2014

Found in Japan, categorized in Growth Outlook and Business Cycle

Tags: spending Japan Abe Abenomics income

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Headline

The real question now is whether July-September will show a nice rebound, or will continue to be anemic

Abstract

Income and spending down again in June, with total nominal household spending down 2.9% from last year

For April-June, spending is down 5% from 2013, twice as bad as the 2.6% drop in April-June 1997 following that year’s tax hike

The real question now is whether July-September will show a nice rebound, or will continue to be anemic

We don’t know of any major economists who thinks that spending will keep dropping for two years, as after the 1997 hike

Nonetheless, even if income and spending is merely anemic rather than plunging, it will further hurt Shinzo Abe’s approval ratings and put in jeopardy the scheduled October 2015 rise in the consumption tax by another 2 percentage points

Spending is down because income is down; among households headed by a worker, nominal income in April-June was down 2%; real (price-adjusted) income was down a whopping 6%

The Abe team and many economists had expected wage hikes because they claim that the labor market is tight

In reality, all of the increase in jobs in the past five years, including during Abe’s tenure, have gone to women who are paid less; also, all the job increase has gone to irregular workers (part-timers and temporaries) who are also paid less

 

About Richard Katz

Richard Katz is Senior Fellow at the Carnegie Council for Ethics In International Affairs, the New York correspondent for Weekly Toyo Keizai, a leading Japanese business magazine, and formerly the editor of The Oriental Economist Report, a monthly newsletter on Japan.

Mr. Katz has taught about Japan’s economy as an Adjunct Associate Professor at the New York University Stern School of Business, and as a Visiting Lecturer in Economics at the State University of New York (SUNY) at Stony Brook.

Mr. Katz is the author of two books on Japan's economic travails and has just finished a third book on reviving entrepreeurship in Japan.

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