The government on Tuesday extended the state of emergency in 10 areas, including Tokyo and neighbouring prefectures as well as Osaka and Kyoto in western Japan.
Household spending fell 0.6% in December compared with the same month a year earlier, official data showed on Friday, slightly better than a median forecast for a 2.4% decline. That marked the first year-on-year spending drop in three months.
Spending fell 6.5% for the full year of 2020 due to the hit from the pandemic, a government official said.
However, household spending rose 0.9% in December from the previous month, although demand for transportation, clothing and festive goods typically bought before the year-end was hurt by the COVID-19 crisis.
Lower demand for services such as travel tours also weighed, as the pandemic forced the cancellation of a domestic tourism campaign.
Household spending in Japan faced pressure throughout much of last year following government calls for people to work from home and put off unnecessary outings, as well as the October 2019 sales tax hike.
The latest data is likely to fan worries about the magnitude of the hit to spending from the ongoing state of emergency in parts of the country, as policymakers face a challenge in avoiding a sharp economic contraction.
Data last week showed Japan’s industrial output fell at an increased pace in December as factories struggled with the impact of global virus lockdown measures, suggesting the country’s economic recovery was already stalling late last year. Reporting by Daniel Leussink; Editing by Sam Holmes