Japan’s households boost spending by most since summer 2022

JAPAN’S household spending rose the most since the summer of 2022 amid persistent inflation, providing support for an economy that’s taking a hit from US tariffs. 

Outlays by households, adjusted for inflation, gained 4.7 per cent from a year ago in May as spending on cars jumped, the Ministry of Internal Affairs and Communications reported on Friday. The result compared with the median economist estimate of a 1.2 per cent gain. 

Consumption makes up more than half of Japan’s economic output and could determine whether the economy will enter or avoid a technical recession.

US tariffs including a 25 per cent levy on cars and car parts are weighing on Japan’s exports, raising the risk that the economy may shrink again in the second quarter after contracting in the first three months of the year. 

Around 64 per cent of economists polled in early June see the tariffs potentially causing a recession in the world’s fourth-largest economy.

Inflation remains persistently above the central bank’s 2 per cent target. Nominal wages have been on the rise, but real wages adjusted for inflation have fallen for four months nonstop through April, meaning that a rise in paychecks has yet to offset the pain of inflation. May wage data are due on Monday. BLOOMBERG