TOKYO: Japan’s household spending climbed for the first time in three months in March as virus restrictions were lifted across the nation, offering some support for private consumption at the end of a bruising quarter for the economy.

       Outlays advanced 4.1% from February, led by spending on transport, communications and clothing, the ministry of internal affairs reported yesterday. Spending was still down from a year earlier, but not by as much as expected.

       The figures point to a stronger-than-expected recovery in household spending as the first quarter came to a close after two weak months when the economy was hit by a resurgence in Covid cases.

       While the gain suggests a recovery is underway, it wasn’t enough to stop spending over the three months falling by 1.8%, an outcome that added to evidence the economy shrank at the start of the year. Economists also fear that rising prices amplified by the weak yen will limit the uptick in spending going ahead.

       “For a while, we’ll see pent-up demand driving spending, but inflation is certainly putting a lid on consumption and it will offset some of the recovery momentum,” said Yuichi Kodama, chief economist Meiji Yasuda Research Institute.

       “After taking price gains into account, incomes are declining. So from the summer, I think consumption will become sluggish.”

       Economists estimate that gross domestic product contracted 0.5% in the first three months of the year as the Omicron wave and resulting restrictions damped consumer spending, according to a Bloomberg survey.

       “The details show rising cost-push inflation is leading households to become more selective in their outlays – a sign that a crunch on purchasing power could damp spending going forward,” said economist Yuki Masujima.

       Prime Minister Fumio Kishida announced a package of spending measures last month to help households and businesses deal with rising costs and shore up recovery and public support ahead of summer elections.

       Russia’s war on Ukraine and lockdowns in China are boosting imported inflation.

       Soaring costs have been exacerbated by a weakening yen that has reduced the purchasing power of Japanese households and firms for imported goods and products.

       The softness of the currency is set to continue with the Bank of Japan (BoJ) vowing to keep up its monetary easing to support economic growth, in contrast to the most other developed world central banks, which are raising interest rates to tackle inflation.

       The BoJ said anaemic pay rises for workers were among the reasons why Japan hasn’t been able to generate self-sustaining inflation.

       The latest pay data showed that wages rose 1.2% in March from a year ago, well below the level policy makers view as necessary to sustain inflation in a healthy manner. —Bloomberg