Japan households cut spending for eighth month as prices rise
Prices for fresh food rose 7% in July from a year earlier, while processed food cost gains slowed to 3%.
Japanese households reduced spending for the eighth consecutive month as soaring costs for daily necessities compel consumers to trim discretionary purchases, according to the Ministry of Internal Affairs and Communications. Adjusted for inflation, household outlays dropped 3.6% in July compared to the previous year, surpassing economists' expectations of a 1.6% decline.
Spending did increase by 0.5% from June when seasonally adjusted. However, outlays on housing repairs, rents, and automobiles contributed to the overall decline. The prolonged spending reduction arises from households grappling with persistent price hikes in daily necessities, even as the government seeks to curb energy costs. Fresh food prices surged 7% in July year-over-year, while processed food costs grew at a slower rate of 3%.
Teikoku Databank noted that the number of anticipated price increases in July surged nearly 22% from a year earlier, with a forecast of 83% increase in August and another spike in September due to higher crude oil and naphtha prices resulting from the Middle East conflict and a weaker yen. Despite wages steadily rising, consumers have limited their spending, indicating inflation fatigue.
The weak data for the economy's third quarter follows flat private consumption in the second quarter, dampening overall growth. Prime Minister Sanae Takaichi aims to tackle inflation by decreasing the sales tax on food and soft drinks to 1% for two years starting in April and extending measures to cap gasoline prices.
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