Japan’s Service Demand Fell Most in 12 Years in March
Japan’s demand for services fell at the fastest pace in 12 years in March as job cuts discouraged consumers from spending in the world’s second-largest economy.
The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, dropped 4 percent from February, the Trade Ministry said today in Tokyo, the biggest decline since April 1997. The median estimate of 21 economists surveyed was for a 1.5 percent decline.
Japan’s economy shrank at a record 15.2 percent pace last quarter as businesses and consumers slashed spending, a report yesterday showed. Economic and Fiscal Policy Minister Kaoru Yosano said rising unemployment is a risk even though there are signs exports and production are recovering.
“Households have become increasingly defensive,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “It will be difficult for consumption to break out of the current slump” given the deterioration in the job market and wages, he said.
The yen traded at 94.49 per dollar at 11:25 a.m. in Tokyo from 94.59 before the report was published.
Declines in retail and wholesale sales drove the drop in the tertiary index, the report showed. Demand for information services including software and outsourcing fell 18.8 percent, an indication that companies are also cutting back on spending.
“The report showed that business spending is deteriorating and consumer spending is very weak,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co business cards. in Tokyo. “That poses a risk for the economic outlook.”
Summer Bonus
Workers at the country’s largest companies will have their summer bonuses cut by a record 19.4 percent this year, according to a survey published yesterday by Keidanren, the nation’s largest business group.
“It’s a clear negative for consumer spending,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. “The pressure on purchasing power is very, very real.”
The jobless rate surged to 4.8 percent from 4.4 percent in March, the largest advance since 1967. Companies from Toyota Motor Corp. to Panasonic Corp. are cutting jobs and wages as they expect losses this year. Nippon Sheet Glass Co. yesterday said it will cut 6,700 jobs by the end of March and doubled its annual loss forecast.
Department store sales dropped 11.3 percent in April as consumers became more concerned about their income and jobs, the Japan Department Stores Association said this week.
“Japan is far from a sound recovery,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “Worsening employment will keep weighing on consumer spending.”
Filed under: money by Finance Boss