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Household Spending Dropped in Japan Again for the 2nd Month

In: Finance, Forex

Japan’s household spending posted an annual decline for the second consecutive month in April, as broadening price rises hit consumer confidence, casting doubt over the recovery of the world’s third-largest economy.

Spending improved from the previous month as households showed increasing appetite for services such as eating out, but the month-on-month rise was smaller than expected, suggesting the drag from the pandemic remained.

In a sign of trouble for the economy, real wages shrank at the fastest pace in four months in April as prices posted their biggest jump in more than seven years, weighing on household purchasing power.

Household spending decreased 1.7% in April from a year earlier, government data showed, weaker than the market forecast for a 0.8% decline in a recent poll, dragged down by lower spending on cars and vegetables.

The month-on-month figures showed a 1.0% increase, also weaker than a forecast 1.3% rise.

The data raises some concerns for policymakers worried about the growing hit households are taking from rising prices for daily essentials and a weakening yen, which is pushing up import costs and making consumers hesitant to spend much.

The yen hit a fresh two-decade low against the U.S. dollar early on Tuesday, last trading around 132.20 yen per dollar.

Government data on Tuesday also showed inflation-adjusted real wages shrank 1.2% in April, dropping at their fastest pace in four months as a 3.0% jump in consumer prices outpaced a gain in nominal wages.

The economy will likely rebound in the current quarter following a contraction in January-March, though it faces increased pressures from high raw material and energy prices as well as the weak yen.

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