Household spending in Japan soars, outlook bleak as price increases weigh on

© Reuters. FILE PHOTO: A man walks down a street in Tokyo’s Shinjuku neighborhood March 8, 2012. REUTERS/Yuriko Nakao

By Daniel Leussink

TOKYO (Reuters) – Household spending in Japan rose for the second consecutive month on an annual basis in February, aided by a flattering comparison to last year’s sharp pandemic-induced slump, but the consumer sector now faces mounting headwinds from rising prices.

Households slashed last month’s spending as food and fuel prices rose faster and the Omicron variant kept purses closed, casting a shadow over the world’s third-largest economy.

A sign of consumer confidence problems, real wage growth faltered in February as global inflationary pressures, exacerbated by the war between Russia and Ukraine, weighed on household purchasing power.

Household spending rose 1.1% in February from a year earlier, government data shows, much weaker than the market forecast of a 2.7% increase in a Reuters poll.

The month-on-month data showed a sharp decline of 2.8%, also weaker than the expected decline of 1.5%.

The data raises some concern among policymakers looking for ways to offset hit households from rising global inflation and a weakening yen, pushing up import costs as the economy sheds the grind of the pandemic.

Government data on Tuesday also showed that inflation-adjusted real wages stalled in February as consumer price growth offset the rise in nominal wage growth, contributing to signs that the outlook for households is not improving.

The economy is expected to grow in the current quarter after contracting in the first three months of the year, although it faces an unpredictable outlook, partly due to the situation in Ukraine and the weak yen.

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