Japan's consumer spending falls for second straight month in August

Japan's consumer spending falls for second straight month in August

The rising cost of living weighed on household budgets, indicating fragility in the country's recovery path, as households cut back spending for a second consecutive month in August.

The ministry of internal affairs reported Friday that household outlays fell by 1.7% from July. Spending increased 5.1% from a year ago, compared to a 6.7% increase predicted by analysts.

A separate report shows wages adjusted for inflation fell for a fifth consecutive month, hurting consumers spending power. Nominal wages rose at a faster pace than the revised figure from the previous month.

There are headwinds for an economic recovery after the Pandemic, according to the weak consumption data.

The fastest inflation in more than three decades excluding tax-hike impacts is threatening to hurt future consumption.

The government is going to compile a new economic stimulus package to help the pain on households and businesses by the end of the month, and has already extended its price-relief measures. The size of the package could be boosted by the accelerating pace of inflation.

Price increases are becoming an obstacle for consumers who haven't experienced inflation above 2% for more than a decade. The economy is expected to have grown in the third quarter after returning to pre-pandemic size in the last three months, according to analysts. In August, retail sales and industrial production beat estimates.

The government did not bring back any virus-related restrictions even though the daily infection numbers topped 200,000 in the summer.

On October 11, the nation's borders are set to reopen to inbound tourism, which may boost spending in the economy with a weak yen boosting visitors purchasing power. The currency's historic slide has made imports of food and energy more expensive and weighed on Japanese households.

Cash earnings were up 1.7% from a year ago, according to the labor ministry. The real wages, adjusted for inflation, fell 1.7%, chipping away at households budgets.

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