Japan household spending tumble points to long war against deflation

[TOKYO] Japan's household spending tumbled in May from the same period a year ago, the fourth consecutive monthly decline, showing scant progress in banishing the legacy of 15 years of deflation.

The 3.9 per cent annual fall in household spending in May missed the median estimate for a 1.5 per cent decline from a year ago by a wide margin and follows a 1.3 per cent annual decline in the previous month.

Consumer spending accounts for more than half of gross domestic product. The decline in May suggests the chance of achieving the Bank of Japan's 2 per cent inflation target are so distant that it has fallen out of sight for many economists.

Household spending fell in May as consumers spent less on dining out, food, and leisure, Friday's data showed.

Many analysts expect Japan's economy to resume growing in the second quarter after a contraction in the first quarter ended the longest continuous expansion since the 1980s bubble economy.

Continued weak spending would also make Japan's economy more dependent on export demand, which is at risk from the US government's protectionist trade policies.

The household spending data could also dampen expectations that the BOJ can achieve its 2 per cent inflation target, an important benchmark in the central bank's campaign to energise the economy and prevent a return to deflation.

REUTERS