TOKYO, May 9 (Reuters) – Japan’s consumer spending unexpectedly fell at its most in a year in March, while persistent inflation saw real wages fall for the 12th month.
Tuesday’s government data also heightened uncertainty over the Bank of Japan’s policy outlook amid slowing global growth and financial sector concerns, even as expectations for a gradual phasing out of ultra-loose monetary conditions grow.
“Rising prices, although mitigated somewhat by the government’s energy subsidy programs, have pushed down consumption by squeezing households’ real purchasing power,” said Masato Koike, economist at Sompo Institute Plus.
Household spending fell 1.9% in March from a year earlier, the data showed, beating economists’ median forecast for a rise of 0.4% and after rising 1.6% in February.
This was the largest drop since March 2022, at 2.3%, when Japan was still trying to contain the spread of the coronavirus.
Seasonally adjusted spending fell 0.8%m/m versus an estimated 1.5% increase and a second month of decline after declining 2.4% in February.
For the full fiscal year 2022, which ended in March, household spending increased by 0.7%, slowing from the 1.6% growth in fiscal year 2021.
Separate data showed that Japanese real wages fell 2.9% in March, marking the full year of declines that began in April 2022 on decades of high consumer inflation.
Despite the boon of eased COVID-19 restrictions for domestic shoppers and international travelers, rising prices have slowed Japan’s consumption-led recovery from the pandemic.
While big companies wrapped up three decades of hefty wage increases at their March work talks, whether the trend spreads to smaller companies is crucial to prospects for monetary policy normalization under new BOJ Governor Kazuo Ueda.
Looking ahead, analysts say a slowdown in price inflation will lead to a real recovery in wages.
Japan’s economy is expected to have grown at an annualized 1.4% from January to March and will continue to grow at the same pace from April to June, economists showed in the latest Reuters poll last month.
Reporting by Kantaro Komiya Editing by Shri Navaratnam
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