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Japan’s Household Spending Falls Amid Surge in Virus Cases


Japan’s households cut back on spending in July amid a surge in virus cases and efforts by some consumers to rein in spending to offset the rising cost of living.

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(Bloomberg) — Japan’s households cut back on spending in July amid a surge in virus cases and efforts by some consumers to rein in spending to offset the rising cost of living. 

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Household outlays dropped 1.4% from June as spending on furniture, clothing and insurance fell, the ministry of internal affairs reported Tuesday. Spending was 3.4% higher than a year ago, compared with a 4.6% gain forecast by analysts. Another report showed wages adjusted for inflation continued to fall while nominal wage growth slowed. 

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The drop in real consumer spending, which accounts for the impact of inflation, adds to signs that the economic recovery from the pandemic remains fragile. The summer saw a record jump in infection cases though the government has continued to refrain from reinstalling virus-related restrictions. 

Rising prices, especially for daily necessities like food and utilities, are hitting consumers who hold the key for the continuation of the economic recovery. Prime Minister Fumio Kishida is set to compile a new round of measures to limit the impact of inflation in September. 

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Inflation remains moderate in Japan, but the nation’s dependence on imported food and energy is making the impact tangible and acute for consumers and businesses. The yen’s slide to a 24-year low against the dollar is also amplifying the pain. 

What Bloomberg Economics Says…

“There are signs that higher prices for food and other imported goods are causing consumers to be more selective, which could limit outlays on an inflation-adjusted basis. High-frequency data show daily sales of necessities increasing at a slower pace.”

— The Asia economists team

To read the full report, click here.

Japan’s economy has returned to its pre-pandemic size, but officials have stressed the need to keep policy support in place to help consumers and companies deal with rising prices. The Bank of Japan is also keeping interest rates at rock-bottom levels to support the economy, saying inflation remains unsustainable without more robust wage growth. 

The latest wage data showed cash earnings rose at a slower pace of 1.8% from a year ago in July, according to the labor ministry. Real wages adjusted for inflation dropped 1.3%, falling for a fourth straight month, meaning workers’ purchasing power is continuing to weaken. 

(Adds more details on wages data)



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