Consumers starting to spend in Japan

04 March 2010

TOKYO: Consumers in Japan are starting to increase their spending levels, with Starbucks and Wal-Mart among the companies hoping to tap in to this trend.

Household expenditure climbed by 1.7% in January on an annual basis, to ¥291,918 ($3,284; €2,410; £2,188), the sixth success monthly increase on this measure.

More specifically, the automotive sector saw an uptick of 11.3% compared with 2008, while outlay on food, including eating out at restaurants, also improved by 2.3% over the same period.

Price deflation and a government stimulus package linked to energy-efficient goods were among the main drivers of this process, as income levels remained largely static, on ¥434,444 a month.

Hideki Matsumura, a senior economist at the Japan Research Institute, suggested that further state intervention may be required to build on the progress that has been made thus far.

"Private consumption is showing steady growth, but to sustain that the government needs to implement fresh measures aimed at stimulating domestic demand," he said.

Seven & I Holdings, the country's biggest convenience store group, announced earlier this week that its profits fell by 57% over the 12 months to the end of February, to ¥40bn.

However, Toru Noda, ceo of Wal-Mart's local arm, which includes outlets operating under its trademark banner and a chain called Seyu, suggested the company is looking at making purchases.

"Wal-Mart's operations in many countries are expanding through acquisitions. We will also consider such activities," he said.

Starbucks will also launch a new instant coffee into Japanese grocery stores in April, having enjoyed success with this approach in its home market.

The brand, to be called Starbucks Via Coffee Essence, is targeted at price-conscious shoppers seeking to control their domestic budgets.

Data sourced from Business Week/Reuters; additional content by Warc staff