REPEAT: MNI ANALYSIS: Japan Modest Spending Intact; Data Soft

--Govt Unlikely To Change View on Spending, Income in Monthly Report

By Max Sato

     TOKYO (MNI) - Weak household spending data released Friday is unlikely to

lead the Japanese government to revise down its view that  consumption and

income are rising moderately in its monthly economic report due later this

month, MNI understands.

     Government officials are more focused on the Cabinet Office's Private

Consumption Integrated Estimates index -- February data are due around April 11

-- as the key indicator to gauge the resilience of consumption in the first

quarter in the wake of the severe winter weather and high fresh food prices in

the first two months of the year.

     The index, which is based on both supply- and demand-side data, was

unchanged in January after falling 0.1% on month in December and surging 1.6% in

November. It rose 0.5% on quarter in October-December, which was in line with

the solid 0.5% on-quarter gain in private consumption in the Q4 GDP.

     --TEMPORARY DOWNWARD EFFECTS

     Government officials see the recent dampening factors as temporary.

     "February household spending was not strong but other indicators didn't

drop as much," said a source who is familiar with the process of preparing the

government's monthly economic report, which is expected to be released around

April 20.

     "The heavy snow and high fresh food prices in January and February had some

effects on consumption but the March Tokyo CPI showed the rate of increase in

fresh vegetable prices had eased to a more normal pace."

     Real average household spending posted the first year-on-year drop in two

months in February, down 0.9% after +1.9% in January, data from the Ministry of

Internal Affairs and Communications showed.

     The weak data prompted the ministry to downgrade its assessment on spending

for the first time in more than two years, saying "the pickup is stalling."

     The data also showed the average real income of households with salaried

workers slumped 2.4% on year in February, marking the second straight drop.

     But the government's assessment that employment and income conditions are

improving is unchanged.

     Total monthly average cash earnings per regular employee in Japan rose 1.3%

in February for the seventh straight year-on-year rise while real wages dipped

0.5% for the third straight year-on-year drop, hit by the recent rise in fresh

food prices.

     Base wages, the key to a steady recovery in cash earnings, rose 0.9% in

February, the 11th straight year-on-year rise.

     --DIFFERENT CALCULATION METHODS

     Government officials downplay the importance of household spending data

because of its small sample base.

     "The weighting of household spending used in estimating the GDP is falling

and it has no direct impact on GDP figures," a senior government economist said.

     A new set of indicators launched by the Ministry of Internal Affairs and

Communications last month showed a mixed picture for February in Friday's

release.

     The Household Consumption Trend Index, indicating per-household spending

patterns, fell a real 1.5% on year in February.

     The Total Consumption Trend Index, which is designed to show macro-economic

consumption patterns similar to those in the total domestic output, rose a real

0.9% on year in February but it fell 0.1% on month.

     "The macro CTI is based on an economic model, so its calculation method is

completely different from that for the Private Consumption Integrated Estimates

index, which is produced by putting together figures from actual data," the

government economist said.

     Data released last month showed retail sales rose 1.6% in February, posting

the fourth straight year-on-year rise, but it was largely supported by high

prices of fuels and vegetables. Excluding gasoline and heating oil, retail sales

gained only 0.4% on year last month.

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