Japan’s household spending on the rise

Household spending in Japan rose for the second month in a row in July despite rising coronavirus cases. Inflationary pressures caused by the weakening of the yen to its lowest level in 24 years cast doubt on the recovery in consumption.

This week’s data showed a slowdown in private consumption that erased some of the gains made in April-June.

Government data showed Tuesday that household spending rose 3.4% in July from a year earlier.

Compared to the previous month, spending fell 1.4% in July, more than the 0.6% forecast.

The month-to-month decline in spending may be due to consumers feeling unsafe going to the stores. Japan reports more coronavirus cases again. The number of infections has risen sharply this month, reaching the highest number in the world during the week of July 24.

Double-digit growth in leisure goods fueled spending growth compared to July 2021, when consumers stayed home due to face-to-face restrictions.

According to the data, hotel costs increased by 55% and transportation costs by 48% compared to the previous year.

According to analysts, the biggest risk for Japanese consumers is that the cost of imported goods will rise due to global commodity inflation and the weakening of the yen. The yen fell above 140 per dollar last week for the first time since 1998.

The senior economist at Mizuho Research and Technology estimates that if the yen remains at 140 per dollar over the next six months, Japanese households will be forced to spend 1.3% more than last year on food, energy and other essentials.

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