MNI INTERVIEW: New Japan Data May Show Firmer Household Demand

-Japan Offl: To See If Any Uptick Due Data Or Econ Recovery

By Max Sato 

     TOKYO (MNI) - Japan's new consumption index and improved household spending

data may show consumer demand was firmer than previously estimated, a senior

government official said Friday in exclusive comments to MNI.

     The Ministry of Internal Affairs and Communications has said it will launch

the Consumption Trend Index along with the March 9 release of household spending

for January, which together is believed to present a more accurate reading of

final demand.

     The ministry is making survey forms for the existing household spending

data easier to fill in by sample households with the introduction of online

book-keeping that covers digital settlements and allows digital reading of

receipts.

     At the same time, it has created a new consumption index that is designed

to cover the trend more comprehensively.

     --POSSIBLE UPTICK

     "We don't know whether the improvement of the data will show consumption

stronger or weaker than previously indicated but we've heard opinions from

members of the (government) study group and economists that figures may turn out

to be higher," Isao Takabe, deputy-director of the Consumer Statistics Division

at the ministry, told MNI.

     "When we smooth out the statistical gap generated by the change in the

survey method, we will try to show whether a possible upward movement is from

the new digital input or from improvement in the economy."

     Initially, the ministry will ask half of the sample households to

participate in online submission of their spending patterns and ask the other

half to use the existing paper forms, which are now more user-friendly. The new

digital method may catch expenditures that were left out in the analogue input.

     In a new initiative to improve official data, the government will promote

the Consumption Trend Index (CTI) as an accurate leading indicator of

"consumption of households" in the gross domestic product data.

     Private consumption, which includes consumption of households, accounts for

about 60% of the GDP and thus holds the key to whether current modest economic

activity continues.

     "GDP is a quarterly indicator but we will now provide comprehensive

consumption data every month and the quarterly figures of our new index will be

released just before GDP data," Takabe said.

     --WIDER DATA SAMPLES

     The CTI comprises two major parts: the macroeconomic index, which is

designed to show similar consumption patterns in the total domestic output; and

the microeconomic index, which indicates the per-household spending trend, he

said.

     The ministry will provide seasonally adjusted and unadjusted series of data

for the two indexes in both real and nominal terms, he added.

     The macroeconomic index comprises both supply- and demand-side data. It is

based on expenditures by households with two or more people and by single

households, retail sales and the tertiary industry activity index (the last two

by the Ministry of Economy, Trade and Industry).

     "So far this index seems to work as an accurate leading indicator of

household consumption in the GDP," Takabe said.

     But on a monthly basis, the headline indicator will be the year-on-year

change in the seasonally adjusted microeconomic part of the Consumption Trend

Index, he said.

     By focusing on this indicator, the ministry is trying to make up for the

main weakness of the existing household spending data -- the small sample base.

     The microeconomic index is based on over 30,000 samples -- about 8,000 from

the household spending survey, 3,000 from the monitor on single households and

20,000 from the survey of household economy, according to Takabe.

     Separately, the Cabinet Office releases the monthly Private Consumption

Integrated Estimates index, which is based on both supply- and demand-side data.

It tends to show a similar pattern to private consumption of GDP and its

quarterly figures are released just before preliminary GDP data.

     The Bank of Japan's Consumption Activity Index reflects a wide range of

sales and supply-side statistics on goods and services and helps capture the

short-term consumption trend, and it has a close correlation to final gross

domestic product figures.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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