Japan Dec household spending falls more than expected, real wages rebound By Reuters

By Kantaro Komiya

TOKYO (Reuters) – Japanese household spending fell for a second month in December as rising inflation offset otherwise robust private consumption fuelled by the country’s reopening from the COVID-19 pandemic.

Real wages rose for the first time in nine months thanks to robust bonuses, raising the prospect that the world’s third-largest economy could sustain its post-pandemic growth and scale back its massive monetary stimulus.

Household spending fell 1.3% in December from a year earlier, government data showed on Tuesday, versus economists’ median estimate for a 0.2% drop and following a 1.2% fall in November.

On a month-on-month basis, spending decreased 2.1% in December, disappointing economists that forecast 0.3% growth. It marked the biggest monthly decline since the 2.8% decrease in Feb 2022.

Japan’s private consumption, which occupies more than half of the country’s gross domestic product, has underpinned the economy since last year as COVID-19 restrictions eased.

The government lifted all domestic curbs in March and relaxed border controls in October, stimulating a tourism boom supported by a weak yen. But consumer inflation running at a 41-year-high speed has put a lid on domestic consumer spending.

On a bright side, separate data showed Japan’s real wages rising 0.1% in December from a year earlier, posting the first gain since March as strong winter bonuses pulled the nominal pay to 4.8%, the fastest since January 1997 and slightly above the inflation rate.

Officials at the government and the Bank of Japan have repeatedly insisted the need for higher wage hikes to support the economic growth accompanied with modest inflation.