Japan July household spending falls at fastest pace in 2-1/2 years

By Satoshi Sugiyama

TOKYO, Sept ‌4 (Reuters) - Japanese ​household ​spending fell in July at the fastest annual pace in 2-1/2 years, government data showed on Friday, highlighting ‌lacklustre private consumption ahead of a closely watched Bank ⁠of Japan meeting.

• Consumer spending fell 3.6% year-on-year, data from the internal affairs ‌ministry showed, worse than a ‌median forecast for a 1.6% drop and marking an eighth consecutive month of decline. Spending fell at the steepest pace since ​January 2024, when it dropped by 6.3%.

• On a seasonally adjusted month-on-month basis, spending edged up 0.5%, below a forecast ⁠for a 2.6% jump.

• Consumer spending will be among the factors the BOJ will ​scrutinise as it decides whether to raise interest rates as early as this month, though the data itself ​is unlikely to weigh heavily on ‌the decision.

• A ministry official said consumers were selective in their spending, increasing outlays on entertainment ⁠and household goods while cutting back on food and transportation.

• The official stopped short of blaming the decline squarely on the rising cost of ⁠living, but analysts said consumers have been feeling the pinch from higher ​costs, with little sign of relief ahead.

• Masato Koike, senior economist at Sompo Institute Plus, said: "Although large wage hikes were achieved again in this year's ‌spring wage negotiations, downward pressure on consumption is expected to intensify as higher prices become more ‌pronounced going forward."

• Annual core inflation in Tokyo, a leading indicator ⁠of nationwide trends, accelerated in ‌August for the third ​straight month, in a sign of broadening price pressures.

(Reporting by Satoshi Sugiyama; Editing by Muralikumar Anantharaman and ‌Tom Hogue)

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