Japan Aug household spending rises annually on reopening, falls month-on-month

By Kantaro Komiya

TOKYO (Reuters) – Japanese households increased spending in August compared with a year earlier as the economy continued to recover from COVID-19 restrictions, but rising prices are clouding the outlook for further gains.

Separate data on Friday showed real wages falling for a fifth month, underscoring growing pressure on Japanese consumer spending, which accounts for more than half of the country’s gross domestic product (GDP).

Household spending rose 5.1% in August from a year earlier, government data showed on Friday. The reading was lower than economists’ median estimate for a 6.7% gain and followed a 3.4% rise in July.

While there are clear signs that activity is slowly picking up, gains last month may have been flattered by the comparison with August 2021, when the country was battling a resurgence of COVID cases.

On a seasonally-adjusted, month-on-month basis, household spending slid 1.7% in August, bigger than a 1.4% decline in July. It was a negative surprise as economists were forecasting a 0.2% monthly growth for August.

With inflation still quickening and the yen’s plunge to 24-year-lows expected to cool consumer spending, economists polled by Reuters have downgraded their growth projections for the world’s third-largest economy.

Prime Minister Fumio Kishida has pledged to compile a fresh stimulus package by end-October, which will likely include subsidy schemes for utility and gas bills backed by at least $100 billion of fiscal spending.

Meanwhile, the government is set to ease strict border control restrictions from Monday in an effort to attract foreign tourists with the weak yen, offering hope for battered services sector.

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