Japan Household Spending Gains for Second Month (Update1)

By Jason Clenfield


Oct. 30 (Bloomberg) -- Japan's households increased spending for a second month in September as lingering summer heat spurred demand for cold drinks and two long weekends prompted drivers to fill their gas tanks and go on vacation.

Spending climbed 3.2 percent from the same month a year earlier, the statistics bureau said today in Tokyo. The number benefits from being compared with a 6 percent drop, the most in almost five years, in September 2006. The median estimate of 32 economists surveyed by Bloomberg was for a 1.4 percent increase.

``Last year's number was extraordinarily weak, that's why we're seeing this rebound,'' Masamichi Adachi, an economist at JPMorgan Securities Japan Co., said before the figures were released. ``You can argue that spending isn't faltering, but it would be better to say it's still weak.''

The unemployment rate rose to 4 percent last month from 3.8 percent, a separate report showed. The number of jobs on offer to each applicant slipped to 1.05 last month from 1.06 in August, the Labor Ministry said today. There have been more positions available than job seekers for almost two years.

``The wage recovery is lagging behind, but we do not see any change in the pattern of job growth underpinning the personal consumption recovery,'' Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan Co., said before the reports.

The yen traded at 114.69 per dollar at 8:50 a.m. in Tokyo from 114.68 before the reports were published.

Retail Sales

Retail sales rose for a second month in September, a report showed yesterday. The Trade Ministry attributed the gain to the hot weather and three-day weekends.

Japan's export-driven recovery is generating jobs at home, putting money into more people's pockets. The number of workers has grown by 1.5 percent this year, helping households to increase spending in eight of the past nine months even as average wages of individuals fell.

Bridgestone Corp., the country's biggest tiremaker, said this month it will more than double capacity at a factory in Kitakyushu, southern Japan, scheduled to open in 2009. The expansion will ``certainly'' require adding employees to the 100 people currently slotted to work at the plant, according to company spokeswoman Tamaki Torikae.

Regional projects like the Bridgestone plant may have an economic benefit that outweighs similar developments in the main cities, said JPMorgan's Adachi.

``First you have the hiring, then you have to have the housing and all of the services that support those people,'' Adachi said. ``The impact can be quite big.''

Still, the increase in employment has yet to translate into higher pay. Wages fell in the first seven months of 2007 and dropped 10 percent in the past decade. The end of tax breaks in June and higher prices of gas and staples such as bread and instant noodles have eroded disposable income and damped sentiment, which is near a three-year low.

The Labor Ministry releases its monthly wages report tomorrow at 10:30 a.m. in Tokyo.