Risks from Stagnant Personal Consumption and Slowing Inbound Demand

「Personal consumption continued to recover. Non-manufacturing industries, including retail, also remained relatively firm, while inbound consumption by foreign visitors to Japan reached a record high in fiscal 2024.」

「During the interim consolidated accounting period under review (1 April–30 September 2024), the domestic economy continued to recover moderately against a backdrop of improving employment and income conditions. Corporate earnings remained firm, and active capital investment in wage increases, digital transformation and decarbonization progressed, supporting personal consumption. Inbound demand also expanded, with tourism-related consumption remaining at a high level.」

「During the nine-month consolidated period under review, the domestic economy saw signs of a recovery in personal consumption and expanding inbound demand as socioeconomic activity normalized following the reclassification of COVID-19 as a Class 5 infectious disease.」

「The domestic economy showed signs of a gradual recovery, including a recovery in personal consumption and expanding inbound demand, as socioeconomic activity normalized following the reclassification of COVID-19 as a Class 5 infectious disease. However, the outlook for economic conditions affecting consumption remains uncertain, with energy and raw material prices continuing to rise and inflation persisting.」

「The domestic economy saw further progress toward the normalization of socioeconomic activity, including the reclassification of COVID-19 as a Class 5 infectious disease. Personal consumption showed signs of recovery, particularly in services, against a backdrop of rising traveler numbers from Japan and overseas.」

「During the 3rd quarter cumulative consolidated period, Japan's domestic economy remained on a recovery trend, supported by the normalization of social and economic activity despite downward pressure on consumption from higher prices. As the response to COVID-19 entered a new phase, the easing of border-control measures in October led to a significant increase in visitors to Japan and signs of recovery in inbound consumption.」

「During the 2nd quarter cumulative consolidated period, Japan's domestic economy remained on a recovery trend as social and economic activity normalized following the lifting of restrictions on activity related to COVID-19 (hereinafter, "COVID-19").」

「Higher energy and food prices have increased the burden on households. Japan's nationwide Consumer Price Index (all items) for April through June was more than 2% higher year on year. Going forward, the outlook is expected to remain uncertain, with cautious consumer behavior anticipated as the preference for saving strengthens.」

「The global spread of COVID-19 has brought the consumer market to a major turning point, increasing the need for more flexible and rapid responses. In addition, uncertain conditions affecting the department store business are increasing, including heightened tensions surrounding Ukraine, surging resource and energy prices, and rising foreign-exchange risk.」

「Meanwhile, the renewed spread of infections from July placed multiple prefectures under a state of emergency, and weak consumer sentiment continued.」

「A third state of emergency was declared in late April, and domestic personal consumption remained sluggish as the consumption environment and consumer sentiment deteriorated because of tighter requests for self-restraint. Although an improvement in personal consumption and the domestic economy is awaited as vaccines become more widespread, a fourth state of emergency was already decided in July amid repeated localized increases in infections. The outlook remains difficult to assess, and it is expected to take time to remove constraints on economic activity.」

「After the first state of emergency was lifted, consumption, which had been sluggish, began to recover in domestic demand, helped by policies including special fixed benefits and the Go To campaign. However, the domestic economy continued under high uncertainty, as the recovery in inbound demand was delayed and the state of emergency was reimposed following a renewed spread of infections, while consumer sentiment remained sluggish because of weak growth in employment and income.」

「However, concerns have emerged that the recovery may slow because of the resurgence of infections in Europe and the United States, the emergence of new variants and a second state of emergency declared in Japan following a renewed spread of infections domestically, as well as tighter requests for self-restraint and deteriorating consumer sentiment. In addition, employment is weakening as the number of unemployed people increases, while wages are declining because of fewer working hours and lower bonuses, potentially prolonging the stagnation in personal consumption.」

「While large-scale economic measures such as the Go To campaign were being promoted, inbound demand remained sluggish because cross-border travel was strictly restricted, leaving the economy in an uncertain and challenging situation.」

「In March, inbound demand almost disappeared because of restrictions on entry into Japan by foreign nationals. From April onward, the issuance and extension of the state of emergency caused personal consumption in accommodation and food services, transportation, retail and other industries to stagnate as people refrained from going out and consumer sentiment weakened, causing a major adverse impact on corporate performance.」

「From late January, the global spread of COVID-19 led to a sharp decline in visitors to Japan and increased calls for people in Japan to refrain from consumption activity to prevent the spread of the virus. Domestic and overseas demand consequently fell rapidly, and uncertainty increased.」

「In the retail industry, point-reward programs for customers using cashless payments were introduced, and some sectors, including convenience stores, did not experience a significant decline after the initial surge in demand. However, the department store industry is facing a challenging environment due to the consumption tax rate increase, sluggish inbound demand resulting from slower growth in visitors to Japan, particularly from South Korea, temporary closures caused by successive typhoons, and difficult winter-goods sales due to the unusually warm winter.」

「Consumer sentiment deteriorated in response to poor weather and the decline in visitors from South Korea, although favorable employment conditions and rush demand ahead of the consumption tax increase on 1 October provided support.」

「Consumer sentiment has weakened, as indicated by movements in the Consumer Confidence Index, and is expected to remain on a deteriorating trend for the time being ahead of the consumption tax rate increase in October. Although the number of visitors to Japan continues to rise, its growth rate is slowing, and signs of deceleration are becoming more pronounced.」

「In addition to slowing demand related to IT and weaker earnings at consumer-facing companies caused by the worsening labor shortage, concerns include a decline in personal consumption following the planned increase in the consumption tax rate and a contraction of the consumer market due to the expected decline in the number of households from around 2020.」

「In Japan, the number of visitors to Japan fell in September for the first time in 68 months because of the effects of a series of natural disasters, including the torrential rains in western Japan, the Hokkaido Eastern Iburi Earthquake and Typhoon 21, but rose again in October. Winter bonuses in 2018 were higher than the previous year, led by large companies, helping support personal consumption. However, real income failed to grow because of negative factors including higher prices associated with rising energy prices, and no significant improvement was seen in personal consumption or consumer sentiment.」

「Consumer sentiment fell sharply, particularly in areas that suffered extensive damage, due to a series of natural disasters, including the torrential rains in western Japan in July, the Hokkaido Eastern Iburi Earthquake in September and Typhoon 21.」

「Consumer sentiment has remained flat, while personal consumption has continued to recover alongside growth in real employee income. In the retail industry, the number of visitors to Japan has increased, helped by new and increased flights, including LCC routes, and eased visa requirements for Chinese nationals. Sales of cosmetics and high-priced goods have remained firm.」

「The economy had remained on a firm footing, supported by solid employment and income conditions. However, concerns have emerged over slower growth caused by the stronger trend toward yen appreciation and falling share prices since the beginning of this year, as well as downside risk to the number of visitors to Japan.」

「In the retail industry, sales of certain high-priced goods remained firm, supported by growth in inbound demand as the number of overseas tourists increased and by the wealth effect from rising share prices, while the yen's depreciation trend continued. However, weak consumer sentiment, particularly in suburban and regional areas, has persisted. The expansion of the sharing economy and the shift toward IT are also requiring companies to respond to increasingly diverse consumer needs and purchasing methods.」

「In the retail industry, sales of certain high-priced goods remained firm, supported by the buoyant stock market and other factors. However, consumption remained challenging, particularly in suburban and regional areas, due in part to population decline, the advancing low-birthrate and aging-population trend, and sluggish real wages per person. Inbound demand is showing signs of recovery against the backdrop of the yen's depreciation trend.」

「In the retail industry, sales of certain high-priced goods remained firm, supported by the buoyant stock market and other factors, but personal consumption, particularly among the middle class, remained weak and conditions continued to be challenging. Inbound demand is showing signs of recovery, driven by the increase in overseas travel and the yen's depreciation trend.」

「Consumer sentiment is declining because of restraint in purchasing due to concerns about the future and sluggish real wage growth. In addition, the diversification and changing nature of consumer preferences have made it more difficult than before to respond to the market, and the retail environment is entering a challenging phase.」

「During the 3rd quarter cumulative consolidated period (1 April 2016 to 31 December 2016), Japan's economy continued on a gradual recovery path, supported in part by the effects of government policies and other measures, with employment and income conditions improving. However, personal consumption lacked strength relative to growth in income and corporate earnings, partly because uncertainty in the global economy had not been dispelled.」

「The retail industry is facing extremely challenging conditions. Domestic personal consumption remains stagnant, while inbound demand, which had previously been strong, has fallen below the previous year due to the stronger yen and higher import tariffs in China, among other factors.」

「The retail industry is facing extremely challenging conditions. Domestic personal consumption remains stagnant, while inbound demand, which had previously been strong, has fallen below the previous year due to the stronger yen and higher import tariffs in China, among other factors.」

「The retail environment is entering a challenging phase. Consumer sentiment is declining because of sluggish real wage growth and economic uncertainty, while growth in inbound demand, which had been strong, is also slowing.」