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Japanese Household Spending Collapses

Last updated 1/30/2009 3:44 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Another set of very dour economic data for  the land of rising sun as household spending contracted very sharply  to -4.5% versus -3.6% anticipated and unemployment rose to 4.4% from 4.1% eyed.   To put the household spending numbers in perspective it must be noted that the contraction in the month prior was only  -0.5% thus this month’s results are nearly  ten times worse than  November’s data.

The news suggests that the massive contraction in global demand for export driven Japanese economy is having a much greater negative impact on the psychology of the consumer than any positive effects of stronger yen. In short, Japanese workers are far more concerned about  the prospect of unemployment rather than any benefit of increase in their purchasing power.

The unemployment data confirms those fears as the rate jumped 30bp last month to 4.4% from 4.1% eyed.  Although Japanese unemployment remains low in comparison to other G-7 nations the upwards pressure on the numbers bodes badly for future economic growth. Japanese economy remains trapped in a horrible dynamic as the ever appreciating yen  raises input costs for country’s manufacturers, while the decline in global demand  decimates exporters profit margins threatening further job losses to come.

With domestic demand  essentially non-existent and global growth slowing markedly, Japanese officials have virtually no options left save for fiscal stimulus triage which has proven to be ineffective so far. The irony of an ever appreciating yen  in a environment of sharply contracting global demand is wreaking havoc with the   Japanese economy at the present time.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.