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Last updated: April 30, 2013 8:15 pm
Five months after Shinzo Abe, Japan’s prime minister, launched “Abenomics”, his push to boost growth is being felt in stores across the nation.
Sonoko Yoshimura, a 61-year-old housewife, says she plans to spend about Y1m ($10,200) on curtains, while Hidekazu Otake, 60, a sales manager at a construction company, wants to swap his 46-inch television for a 50-inch model.
Both shoppers have been cheered by the fall in the yen sparked by Mr Abe’s aggressive measures to return Japan to growth.
Since the previous government called an election in mid-November, share prices of the biggest Japanese companies have risen more than 60 per cent.
“My stocks had been performing badly for so long. Now I feel like buying things,” said Mr Otake, who expects to spend another Y1m or so on a trip to Hawaii this year.
He is not alone. Many Japanese consumers share the urge to splurge. Data released on Tuesday showed that household spending rose 5.2 per cent in March, its highest year-on-year growth in nine years.
The figure was included in mostly bright economic data published on Tuesday. Excluding the effects of a tax increase in 1997 and the 2011 earthquake, sales at large retailers posted their biggest gain in 20 years, rising 2.4 per cent.
Last week, the Bank of Japan said the economy had “stopped weakening”, partly on the back of “improvements in household sentiment and the elderly’s large appetite for spending”.
Economists reckon consumer spending will contribute about three-quarters of the expected 2.1 per cent growth in Japan’s economy in the first quarter when the government reports the figures.
Hajime Takata, chief economist at the Mizuho Research Institute in Tokyo, said more active consumers are a vital part of the “launch phase” of Mr Abe’s campaign.
For the first time, everyone gets the sense that something is happening
- Kazunori Fuke, Ma Mere
According to Mr Takata, money hoarded, rather than spent, has been a big contributor to Japan’s stop-start growth and persistent deflation of the past 15 years.
“In a deflationary environment, delaying spending was wise. Now, people are starting to think that things will no longer get cheaper,” he said.
While consumer spending appears to be rebounding, signals from elsewhere in the economy are more mixed. Industrial production expanded 1.9 per cent between January and March from the previous quarter, halting three quarters of declines, with particularly strong performances from chemicals companies and suppliers of electronics parts.
Inventories have also been whittled down, but fragile demand outside Japan means that manufacturers’ forecasts continue to overshoot production.
Analysts note that while the weaker yen has improved accounting profits, it may take another month or two to feed through to orders.
The FT explains the state of the Japanese economy and outlines the key principles of Abenomics
“Changing production contracts can be difficult for customers, and takes time,” said Azusa Kato, an economist at BNP Paribas.
Meanwhile, a fall in overall retail sales – down 1.4 per cent in March from February – suggests that the wealth effect of Abenomics is being felt most keenly by richer people, or those with savings to tap.
Four-fifths of Japanese households have never held any securities and 88 per cent have never invested in a mutual fund, according to a survey last year by the Japan Securities Dealers Association.
Still, Mr Abe has challenged broad expectations of the country’s continuing stagnation. “Now, for the first time, everyone gets the sense that something is happening,” said Kazunori Fuke, chief operating officer of Ma Mere, a chain of boutiques selling imported children’s clothes.
Will it work? Mr Fuke smiles and cocks his head. “I don’t know. But it will be impossible to solve our debt situation without an improving economy.”
Additional reporting by Mitsuko Matsutani
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