Goods Prices Rise, Japanese Household Spending Drops for Two Months in a Row

Goods Prices Rise, Japanese Household Spending Drops for Two Months in a Row


Japanese household spending posted an annual decline for the second month in a row in April. This comes as widespread price increases hit consumer confidence, and cast doubt on the recovery of the world's third-largest economy.

Tuesday (7/6), government data showed, Japanese household spending in April fell 1.7% year-on-year (yoy). The decline was bigger than the market's forecast for a 0.8% drop in a Reuters poll, dragged down by lower spending on cars and vegetables.


Meanwhile, when compared to last month, Japanese household spending in April rose 1.0%. This realization was also weaker than the 1.3% increase forecast.

Spending increased from the previous month as households showed an increased appetite for services such as eating out. However, the gains on a monthly basis were still smaller than expected, and suggest the drag from the pandemic remains.

In a sign of trouble for the economy, real wages shrank at their fastest pace in four months in April as prices posted their biggest jump in more than seven years, weighing on household purchasing power.

The data raised some concerns for policymakers worried about households being impacted by rising prices of daily necessities and a weaker yen, which pushes up import costs and makes consumers hesitant to spend big.

The yen hit a fresh two-decade low against the US dollar early Tuesday, and was last trading at around 132.20 yen per dollar.


Government data on Tuesday also showed inflation-adjusted real wages shrank 1.2% in April, dropping at their fastest pace in four months as the 3.0% jump in consumer prices outpaced nominal wage increases. Read the full story

The economy is likely to recover in the current quarter after contracting in the January-March period, albeit facing increasing pressure from high raw material and energy prices and a weak yen.


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