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Japanese Household Spending Rose 8.2% in January (Update6)

Japanese Household Spending Rose 8.2% in January

March 1 (Bloomberg) -- Japanese household spending had the biggest increase in nine months in January and the world's second- largest economy created the most jobs since 1992, adding to evidence a recession is ending.

Spending by households headed by a salaried worker rose 8.2 percent from December, seasonally adjusted, the statistics bureau said today in Tokyo. The economy added 470,000 jobs, helping the unemployment rate hold at a six-year low of 4.5 percent.

Prime Minister Junichiro Koizumi said the improving job market and higher wages are spurring a recovery in consumer spending, which makes up half the economy. Stronger demand for workers encouraged companies to pay fatter year-end bonuses and prompted Pasona Inc., Japan's biggest employment agency, to increase pay.

``There's a good chance that the job environment can continue to improve, so that should help a recovery in consumption,' said Azusa Kato, an economist at BNP Paribas Securities Japan Ltd. ``The economy looks like it's recovering again.'

Japan fell into recession last year for the fourth time since 1991 as export growth faltered and consumer spending declined. The economy shrank at an annual 0.5 percent pace in the three months to Dec. 31, the third quarter of contraction.

Reports yesterday showed the economy is picking up. Industrial production rose 2.1 percent in January from December, and housing starts rose 6.9 percent from a year earlier, the biggest increase in four months.

Stocks Rise

The Nikkei 225 Stock average rose 0.3 percent to 11,780.53 at the 3 p.m. close of trading in Tokyo, led by Aeon Co., the nation's largest retailer, and Daikin Industries Ltd., its largest maker of air conditioners.

Benchmark government bonds fell, pushing yields to the highest in almost four months. The yield on the 1.3 percent bond due in December 2014 rose 2 basis points to 1.49 percent at 4 p.m., after reaching 1.505 percent, the highest since Nov. 9. A basis point is 0.01 percentage point.

Pasona, Japan's largest employment agency, expects sales to jump 16 percent to 182.2 billion yen ($1.74 billion) in the year ending May 31. Last fall, Pasona began to increase wages of workers it contracts to companies, said spokeswoman Yuko Nakase.

The household spending survey showed real disposable incomes increased 12 percent in January, the biggest increase on record. The average Japanese household had 444,966 yen in monthly disposable income in 2004, according to Bloomberg data.

Sales at department stores including Takashimaya Co. and Isetan Co. rose for the first time in 11 months in January as New Year discounts attracted shoppers, the Japan Department Store Association said on Feb. 24.

Restaurants and Bars

``The economic recovery is starting to show signs of spreading to households,' Prime Minister Koizumi told lawmakers in parliament today.

An improvement in spending would bolster revenue at Tokyo's nearly 60,000 restaurants and bars, which employ 480,000 people, according to figures from the Tokyo Metropolitan government.

Skylark Co., Japan's biggest restaurant operator by sales, expects net income to increase 9 percent to 8 billion yen in the year started Jan. 1 as it opens more restaurants and expands its takeout and fast food delivery business.

``Consumption has stabilized now, compared with the decline in 2001,' when Japan was last in recession, said Koichi Takatori, a director at Skylark, in an interview on Feb. 25.

Wage declines have been showing signs of ending. Wages have risen in three of the past nine months, compared with five months in the past four years, according to government data.

Pension Problems

Consumer sentiment has risen for three of the past four months. Winter bonuses to workers rose 1.4 percent in 2004, which would be the first increase since 1996, estimates Naoki Iizuka, chief economist at Dai-Ichi Life Research Institute.

``Labor compensation of the household sector has finally started recovering,' Iizuka said.

From a year earlier, household spending rose 2.6 percent. The median forecast in a Bloomberg News survey of 27 economists was for a 1.2 percent decline.

The recovery in spending may be limited by higher taxes and pension payments. Government plans to cancel tax rebates would add 12,083 yen to monthly bills at an annual cost of 3 trillion yen to taxpayers.

``There are concerns about pension problems and tighter fiscal policy,' said Akio Yoshino, who helps manage the equivalent of $16 billion in assets at Societe Generale Asset Management (Japan) Co.

The government is seeking ways to reduce the world's largest public debt, which it expects to reach 151 percent of gross domestic product in the year starting April 1.


LINK: http://www.bloomberg.com/apps/news?pid=10000080&sid=aSHmtaBB7wM0&refer=asia