Japan July household spending rises, weaker than expected By Reuters

TOKYO (Reuters) – Japanese household spending rose less than expected in July, government data showed on Friday, as consumers remained wary of loosening their purse strings in the face of higher prices.

Consumer spending rose 0.1 percent in July year-on-year, compared with the market’s average forecast for a 1.2 percent increase. On a seasonally adjusted month-over-month basis, spending fell 1.7 percent versus an expected 0.2 percent decline.

Data a day earlier showed Japan’s inflation-adjusted wages rose for a second straight month in July, mainly due to an increase in summer bonuses. Base pay, or regular pay, marked the fastest pace of growth in nearly 32 years, reflecting the results of spring wage talks between labor and management.

But a government official said the big test would be whether real wages continue to rise in August and beyond, without the seasonal factor of summer bonuses.

Along with solid wages and sustainable inflation, robust consumption is among the factors the Bank of Japan says are key to its decision to raise interest rates further.

The BOJ abandoned negative interest rates in March and raised short-term rates to 0.25% in July, believing the economy was making progress towards a sustainable 2% inflation target.

The Japanese government last month updated its economic assessment for the first time in more than a year, based on signs of improvement in personal spending, which accounts for more than half of Japan’s economy.