JAPAN: Elderly Japanese Helping to Underpin Consumption

TOKYO (Reuters), May 30, 2006: Despite growing talk of the serious economic challenges posed by Japan's ageing population, the elderly appear to be underpinning Japanese consumption for now. Average spending in April by Japan's non-wage earners -- such as the elderly, retirees and company executives -- rose 1.6 percent from the same month a year earlier, marking the second straight month of rise, government data showed on Tuesday. That increase came even as overall household spending in April fell 2.0 percent in price-adjusted real terms, while spending by wage-earner households dropped a real 4.3 percent. Japanese firms have promoted early retirement packages for their staff as part of corporate restructuring efforts over the past decade, and many Japanese aged around 60-70 are still healthy and often have extra cash to spend. "They are spending on packaged travel tours and education," a senior official from the Ministry of Internal Affairs and Communications, which released the data, told reporters. Furthermore, the proportion of non-wage earner households in the overall household data has been rising gradually in recent years as more baby boomers retire. They now account for 45 percent of overall households in the data, up from 40 percent about five years ago. "As more baby boomers retire, we will probably need to pay more attention to spending by non-wage earner households," the official told Reuters. Overall, consumption was dented by cool and rainy weather on many weekends in April, though higher income and growing employment have persuaded economists that consumption, which accounts for some 55 percent of economic activity in Japan, would remain resilient. Still, there is room for caution as household spending data is known for being skewed by the limited number of people surveyed, including too many government employees. Government employees have suffered a decline in their wages as part of government fiscal consolidation efforts by cutting salaries of bureaucrats, and their spending is seen as much weaker than that of private-sector wage earners. "The recent decline in household spending is mainly due to the inclusion of bad samples whose income levels are low.... Spending by private-sector wage earners is much stronger, which is not fully reflected in this data," said Naoki Iizuka, chief economist at Dai-ichi Life Research Institute. "This sample problem may also be making spending figures by non-wage earners fluctuate, so we may need to monitor this trend a bit longer to make a conclusion," he added. © Reuters 2006. All Rights Reserved.