Japan’s household spending falls for fourth month
JAPAN’S households cut consumption for a fourth month as inflation continues to weigh on their purchasing power, showing an economic fragility that’s likely to keep the Bank of Japan (BOJ) cautious about additional rate hikes.
Outlays adjusted for inflation fell 0.4 per cent in November from a year earlier, compared with the consensus estimate of a 0.9 per cent drop, the Ministry of Internal Affairs reported on Friday (Jan 10). The gauge has risen only twice in the past 12 months. Nominal spending rose 3 per cent compared to the previous year.
Outlays fell for household durable goods and clothing.
Consumer spending has been on a downtrend for months as shoppers cope with inflation that’s been at or above the BOJ’s price target for more than 30 months. The biggest wage growth in years has yet to change the tide as inflation continues to outpace a boost in paychecks.
In November, Japanese workers’ base salaries grew the most in more than three decades, but real wages fell for a fourth consecutive month.
The central bank has signalled caution over the timing of its next interest rate hike, with governor Kazuo Ueda seeking confirmation that strong wage momentum will carry over into the spring negotiations between companies and labour unions. The BOJ is set to wrap up its next policy decision meeting on Jan 24.
Even if wage growth stays robust, fragile consumption may give the BOJ another reason to pause, given it indicates a limit to the virtuous economic cycle the central bank is seeking.
In its branch managers report on Thursday, the BOJ also signalled it sees progress on wage hikes, although comments were not strong enough to make either January or March more likely as the next timing for a rate hike. BLOOMBERG
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