Does summer heat mean better sales? Maybe not for temps over 35 C, say Japan economists

TOKYO — Scorching summer heat has already arrived across Japan, with the mercury soaring to 35 degrees Celsius and higher during the day. In economics, it’s believed that rising temperatures boost consumer spending in the summer, but does extreme heat really have positive effect on the economy? The Mainichi Shimbun asked experts.

High temperature days usually mean good weather, and this will encourage consumers to go out and spend. It is believed that extreme heat positively affects consumption when this cycle continues, sometimes referred to as the “extreme heat effect.”

Certain products perform well under the influence of extreme heat. According to the Development Bank of Japan, expenditure on items such as watermelons, ice cream, sherbet and beverages excluding green tea increases more on “extremely hot days” when highs hit 35 C or above, compared to days with temperatures between 30-34.9 C or mildly hot days. Recently, heatstroke prevention items such as portable fans and cooling towels have been developed and have become commercially available, to the delight of consumers.

However, in the case of brutal heat, such economic benefits do not always surface. Takuya Hoshino, the chief economist at Dai-ichi Life Research Institute Inc., looked into the relationship between daily consumer expenditure and maximum temperature, and found that consumption trends changed significantly around the 35 C mark.

On days when highs stay between 30 and 34.9 C, the higher the temperature, the more spending there was. In contrast, on extremely hot days, the higher the temperature, the less consumption. One reason for this could be heightened caution against heatstroke, leading more people to refrain from unnecessary outings. Hoshino points out, “We need to be wary that excessively hot summers can cool down consumption.”

Excessive heat can also strain household finances. If air conditioner usage increases to combat heat, power consumption will rise significantly, leading to higher electricity bills. Heat can also adversely affect the growth of vegetables, especially leafy ones such as cabbage and lettuce.

Yoshiki Shinke, a senior executive economist at Dai-ichi Life Research Institute, says, “If the summer heat is excessive, vegetable prices may rise from summer to fall. Vegetables are familiar items that are frequently purchased, meaning that consumers are more alert when their prices increase compared to other goods. This could potentially affect spending.”

While the Japanese government is trying to revitalize consumption through measures such as fixed tax reductions and reviving subsidies for electricity and city gas bills, Shinke warns, “Severe heat could become an unexpected adversary (to the economy).”

(Japanese original by Taiki Asakawa, Business News Department)