Japan’s household spending falls again despite wage gains
Consumers remain cautious as persistent inflation squeezes purchasing power.
Japan's household spending declined for an eighth consecutive month in August, despite wage growth continuing to rise. Despite real wages, adjusted for inflation, increasing each month this year, consumer demand has not strengthened. The internal affairs ministry reported that household spending, adjusted for inflation, fell by 3.1% in August compared to the same period a year ago, falling short of economists' expectations of a 3.6% decline.
Economists attribute the weak spending to persistent inflation squeezing consumers' purchasing power. Harumi Taguchi, a principal economist at S&P Global Market Intelligence, noted that while wages are rising, the increasing number of retirees, who do not benefit from wage increases, is dampening consumer confidence. BOJ Governor Kazuo Ueda has repeatedly cautioned about inflation risks, and many market participants anticipate the Bank of Japan will raise interest rates again by the end of the year.
The data highlights the disconnect between rising inflation and domestic demand. The decline in spending on education, entertainment, food, home maintenance, and utilities, led the overall index lower. Only transportation and communications spending, related to car purchases, showed growth. The only silver lining for households may come in the form of a cut in sales tax on food to 1% from the current 8% starting in April, set to revert to 8% after two years. However, economists doubt the tax cut will significantly boost consumption.
Written by urgent.news from Japan Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
