Intellasia East Asia News – Japan August Household Spending Increases Yearly As Reopening

Japanese households increased spending in August from a year earlier as the economy continued to recover from COVID-19 restrictions, but rising prices are clouding prospects for further gains.

Separate data on Friday showed real wages falling for a fifth month, underscoring growing pressure on Japanese consumer spending, which accounts for more than half of the country’s gross domestic product (GDP).

“Price increases are accelerating, especially for food products, and household sentiment could become more frugal in the coming months,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

Household spending rose 5.1% in August from a year earlier, according to government data released on Friday. The reading was below economists’ median estimate for a 6.7% gain and trailed a 3.4% rise in July.

Although there are clear signs that activity is slowly picking up, August’s gains were flattered by comparison with August 2021, when the government stepped up state of emergency restrictions to combat a resurgence cases of COVID.

On a seasonally adjusted monthly basis, household spending fell 1.7% in August, more than a 1.4% decline in July. This was a bad surprise as economists were forecasting monthly growth of 0.2% for the month of August.

As inflation continues to pick up and the yen’s plunge to a 24-year low is expected to dampen consumer spending, economists polled by Reuters have downgraded their growth projections for the world’s third-largest economy. .

Retail price increases for food and beverage companies peak in October, with nearly 6,7,000 items rising in price by an average of 16%, according to a monthly survey by market research firm Teikoku Databank. .

Analysts expect the Bank of Japan’s favorite measure of consumer inflation to top 3% in October.

Prime Minister Fumio Kishida has pledged to develop a new stimulus package by the end of October, which will likely include subsidy programs for utility and gas bills backed by at least $100 billion in tax expenditures .

Meanwhile, the government is set to ease tough border control restrictions from Monday in a bid to attract foreign tourists with the weak yen, offering hope to the struggling service sector.

“With the end of the coronavirus outbreak and government support for travel, private consumption (from Japan) is expected to continue growing overall,” Shinkin’s Tsunoda said.

“But the momentum of what could have been a consumption-led recovery is being dampened by inflation.”

Category: Japan

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