Monthly Consumption Up, But Not On Housing

In real terms, the average monthly income per household is up 1.8% and average consumption expenditures per household are up .9% from the previous year. However, one area that elicits concern is the decrease in housing consumption by 8.5% in real terms. Is this just a slowing down effect from the aftermath of The Great East Earthquake reconstruction, or does this signal trouble for recovery? Accordingly, housing prices in both Tokyo and Osaka have fallen this past year.

The second largest drop in consumption was Education, which fell by 5.4% in real terms from the previous year. This may be more attributed to the aging population.


5 thoughts on “Monthly Consumption Up, But Not On Housing

  1. kuveke

    While Japan’s housing consumption is down this isn’t that surprising due to the fact that Japan’s property prices have fallen for the 21st straight year. On the other hand prices have fallen by their smallest percent, 2.5% in years. I think that the losses in housing consumption are probably due to the earthquake, especially as real GDP shows gains in most other data looked at in the study. Fuel, light, and water charges are most likely linked to housing in that you use more electricity, fuel, and light in a bigger house. The average propensity to consume is down but again this could be lingering effects of the earthquake. I think your point about the aging population is spot on for why education consumption has fallen. Professor has talked about this somewhat in class. This point actually makes me wonder is part of the housing consumption pattern is due to the aging population as well. Where do elderly people live in Japan? With their children, by themselves, or in retirement homes? What the effect on housing consumption for each of these choices?

  2. wilburns

    It seems like one could argue that the decrease in housing consumption and education consumption share a common cause, that being the aging and shrinking population. If a country has enough housing for, say, 100 people, and the country’s population is 200, then demand for housing will be very high and housing will consumed as fast as it can be built. However, if enough housing is constructed to house those 200 people, and the population decreases by 25 due to death of old age with only 15 people born during that same time period, the country now has a population of only 190 people with housing for 200. Now, the country has a surplus of housing, and therefore a decrease in housing consumption (assuming everyone only buys enough housing for their situation with no second home, vacation house, etc.) This decline would be further exacerbated if housing is used more efficiently. As previously stated, a more efficient use of housing would look like grandparents living with their grandchildren and children.

    The same goes for education. Obviously, if a country is having fewer children, that means the education system doesn’t need to educate as many children as they did previously.

  3. the prof

    Calculating housing consumption is challenging, because in Japan 60% of households own their residence (stand-alone or condominium) and so rental markets are “thin” for judging the market worth of that consumption. Presumably most residents don’t see their floor space shrink by 5%!! — so then should real consumption be left unchanged when prices for real estate (and for rental housing) fall? I simply don’t know the details of that calculation in Japan, but I do know that even the government provides a separate consumption measure (as part of GDP) that excludes “imputed rent” from owner-occupied housing.

  4. henryl

    Could this be relevant to Japan’s changing demographics? As the population gets older perhaps housing is more condensed? I believe Japan shares the oriental knack for having many extended families stay together and caring for the elderly right? Perhaps this results in a slight decrease of housing consumption.

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