Weak spending shows Japanese consumer doubts about Abenomics

Mon Feb 17, 2014 4:07pm EST
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By Stanley White

TOKYO (Reuters) - Japanese consumers ended last year with a whimper instead of the bang many had expected, reinforcing a nagging worry that the prime minister's aggressive policies are struggling to find support among those key to its success.

Economic growth figures on Monday added to evidence that concern about job security is holding back consumers, trumping the urge to spend before a rise in the national sales tax rate in April makes goods more expensive.

Although Japan's jobless rate is at a six-year low, the number of contract workers, who are paid less than regular staff, is at a record high.

That equation is undermining the government's base scenario that consumer spending will boom in the months before the tax hike, fall sharply immediately afterwards and then resume steady growth underpinned by falling unemployment and rising wages.

Such a scenario is key to the broader goal of dragging the sluggish economy out of almost two decades of stagnation marked by grinding deflation and on to a path of sustainable growth.

"We're facing the uncomfortable possibility that consumer spending won't get any better before the tax hike," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co.

"The jobs market is improving, but the problem is non-regular workers. This could be behind disappointing spending."

The government, which has played an unusually prominent role in lobbying companies to raise wages, could come under pressure to use more structural economic reforms to broaden growth and reverse labor market reforms that could increase contract workers.   Continued...

People browse a bookstore at a train station in Tokyo February 17, 2014. REUTERS/Yuya Shino