Japanese households increased spending in August compared to a year earlier in the year, as the economy recovered from COVID 19 restrictions, but rising prices are hindering the outlook for further gains.
Government data showed on Friday that real wages fell for a fifth month, under pressure on Japanese consumer spending, which accounts for more than half of the country's gross domestic product GDP Household spending, rose 5.1 per cent in August from a year earlier in the year. The reading was lower than the median estimate for a 6.7 per cent gain and followed a 3.4 per cent rise in July.
Gains last month may have been flattered by the comparison with August 2021, when the country was battling a resurgence of COVID cases, as there are clear signs that activity is slowly picking up.
In August, household spending fell by 1.7 per cent, larger than a 1.4 per cent decline in July, as a result of the seasonally adjusted month-on-month basis. It was a negative surprise as economists predicted a 0.2 per cent monthly growth for August.
With inflation still tightening 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 October, which will likely include subsidy schemes for utility and gas bills backed by at least $100 billion of fiscal spending.
The government is going to relax the border control restrictions on Monday in an effort to draw foreign tourists with the weak yen, giving hope for the battered services sector.