Data released Tuesday (Dec. 6) show Japanese household spending rose for the fifth straight month in October from a year earlier as more people shopped and dined at restaurants. Household spending rose 1.2% in October from a year earlier. This slightly exceeded economists’ expectations of 1.0%. Spending rose 1.1% in October, the second consecutive month of growth. Analysts had expected growth of 1.5% for the month.
Consumption was also boosted by government travel subsidies to revive the tourism industry, which has recovered from the slump caused by the COVID-19 pandemic measures.
However, rising prices for everyday goods and household items could soon dampen consumer spending. In October, consumer prices in Japan rose by 3.6%. This took inflation to its highest level in 40 years, supported by a weaker yen and rising import costs.
Core consumer inflation exceeded the Bank of Japan’s 2% target for the seventh consecutive month in October. However, weak wages and service prices made the central bank reluctant to withdraw its stimulus measures.
Data from the Ministry of Labor show that real wages in Japan, a key indicator of consumer purchasing power, fell 2.6% in October from a year earlier. This was the sharpest decline since June 2015.