Higher employment means higher household spending right? Not in Japan

SINGAPORE (Aug 31): Household spending in Japan has bucked conventional economic theory, falling 0.5% in July even as the unemployment rate fell to 3% in the same month, says a Wall Street Journal report on Tuesday.

That means that while companies have hired more workers, consumers are not feeling confident enough to spend more, even as the country’s labour market is at its strongest in over two decades.

In economics, the propensity to consume can be calculated by dividing money spent divided by disposable income. In Japan, the propensity to consume fell 2.1 percentage points to 64.6% in July, the lowest since 2006, from a year ago.

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