Japanese household spending declines for the fourth consecutive month

According to Golden Ten Data on May 12, despite continued wage growth, household spending in Japan has declined for the fourth consecutive month, highlighting the persistent fragility of consumer sentiment. Data released on Tuesday showed that, after adjusting for inflation, Japanese household spending in March fell by 2.9% year-on-year, compared to market expectations of a 1.3% decline. After seasonal adjustment, household spending was down 1.3% from February. Although wage growth in March outpaced inflation for the third consecutive month, the Iran war has driven up energy prices, intensifying concerns in the market that inflation may further heat up. In its latest outlook report, the Bank of Japan stated that if oil prices remain high and the yen depreciates sharply, the core consumer price index (excluding fresh food) could rise by 3.1% in the current fiscal year and could increase by 3% over the next 12 months. The outbreak of the Iran war led to the largest drop in Japanese consumer confidence in nearly six years in March, and this indicator fell further in April. The business sentiment among Japanese merchants dropped in March to its lowest level since the pandemic. Preliminary statistics from Rengo, Japan's largest trade union confederation, show that employees at large Japanese companies have achieved wage increases of about 5% for the third consecutive year.