Overview
- June household spending fell 3.3% year-on-year and plunged 6.4% on a seasonally adjusted month-to-month basis, a much larger hit than markets expected.
- The June reading was the seventh consecutive monthly drop in spending even though real wages rose 1.6% year-on-year for a sixth straight month.
- A ministry official said typhoons and heavy rainfall weighed on June outlays, and economists warned rising food and energy costs tied to the Iran conflict add further pressure.
- The surprise scale of the pullback weakens the near-term case for a Bank of Japan rate hike as soon as September by casting doubt on the strength of domestic demand.
- The share of income devoted to consumption has fallen since late last year and consumer confidence remains well below long-run averages, suggesting households are saving more and slowing a domestic-led recovery.