Consumer spending in Japan increased by 0.5% in April compared to the previous year, according to data from the internal affairs ministry. This was slightly below the median market forecast of a 0.6% increase.
On a seasonally adjusted, month-on-month basis, spending decreased by 1.2%, against an estimated rise of 0.2%.
“Personal consumption, which has been stagnant for a long time, continues to be weak,” said Masato Koike, an economist at Sompo Institute Plus. “High prices are weighing on household consumption.”
Sluggish private consumption is a concern for policymakers aiming to achieve sustained economic growth supported by solid wages and durable inflation, which are necessary for normalising monetary policy.
Government data showed that while spending on education, clothing, and footwear increased in April, expenditures on food, entertainment, and utilities decreased.
The consumption data was released a day after Bank of Japan board member Toyoaki Nakamura, one of the more dovish members, expressed concern that recent sluggish domestic consumption could cause inflation to fall short of the central bank’s 2% target from fiscal 2025 onwards.
Separate data released on Wednesday showed Japan’s regular pay in April rose at the fastest pace in nearly three decades, but inflation-adjusted wages remained weak, marking the 25th consecutive month of decline.
Looking ahead, consumption is expected to gradually improve as wage hikes from this spring’s labor talks take effect, inflation slows down, and temporary cuts in resident and income taxes boost spending, according to Koike from Sompo Institute Plus.
“If consumption continues to be weak, it will be difficult to normalise monetary policy, but real wages are expected to recover and consumption is believed to pick up, which will give momentum for policy normalisation,” Koike said.
