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Japan household spending drops for seventh month, clouding BOJ hike path

June spending fell 6.4% month-on-month versus a 3.1% forecast, adding uncertainty about domestic demand ahead of the BOJ's next decision.

Reported · Written up by our desk · Central Banks

Japan household spending unexpectedly fell for a seventh straight month in June, according to data from the Japanese internal affairs ministry, raising fresh doubts about the strength of domestic demand as the Bank of Japan approaches its next rate decision.

Forexlive reports that consumer spending decreased 6.4% month-on-month on a seasonally adjusted basis, compared with an estimated 3.1% decline. Year-on-year, spending fell 3.3%, also missing the median forecast for a 1% rise.

The report highlights a divergence in the data set, with Japan's labour ministry showing real wages grew 1.6% year-on-year in June for the sixth consecutive month. Still, actual consumer spending continued to pull back even as purchasing power improved.

The weaker consumption reading is expected to complicate the BOJ's assessment of whether it can tighten as early as September, potentially weakening yen sentiment if markets interpret the development as pushing the BOJ's timeline further out. The combination of rising pay and falling spending leaves the central bank with a less clear picture of consumer health going into its policy call.

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