Japan’s household spending to slump in February as virus hits demand

By Leika Kihara

TOKYO (Reuters) – Japan’s household spending likely fell for the fifth straight month in February, a Reuters poll showed on Friday, adding to growing signs of the pain the coronavirus pandemic is inflicting on an economy already on the cusp of recession.

Machinery orders, a leading indicator of capital expenditure, are also expected to have slumped in February, suggesting the world’s third-largest economy is losing support from domestic demand before exports recover from the hit from last year’s U.S.-China trade war.

Household spending is expected to have fallen 3.9% in February from a year earlier, a Reuters poll showed, matching January’s decline as unusually warm weather hurt demand for winter clothing.

The impact from the coronavirus added to woes for consumption, which continued to suffer the fallout from a sales tax hike rolled out in October, analysts say.

“Food demand grew somewhat, but spending on most other goods were weak. Spending on services will likely slump ahead due to government requests for households to stay home,” analysts at SMBC Nikko Securities wrote in a note.

Machinery orders likely fell 2.7% in March from the previous month, the poll showed, suggesting companies will scale back capital spending on prospects of slumping demand at home and overseas.

The government releases household spending data at 8:30 a.m. on April 7 (2350 GMT on April 6).

It will release machinery orders data at 8:50 a.m. on April 8 (2350 GMT on April 7).

Supply chain disruptions, travel bans and social distancing policies triggered by the pandemic have hit Japan’s economy, which is already on the brink of recession.

Analysts expect Japan’s economy, which shrank in the final quarter of last year, to suffer two more quarters of contraction as the pain from the pandemic deepens.