Japan's Household Spending Disappointed, USD/JPY Stable

Japan's Household Spending slumped on a monthly basis, as the consumption sector began to be hit by global inflation and the trend of stagnant real wages.

On Tuesday (05/April), the Japanese Cabinet office released data on Household Spending which only reached 1.1 percent on an annual basis (Year-over-Year) in February. This figure was below expectations of a 2.7 percent increase and fell quite dramatically from the 6.9 percent increase in January.

Japan's household spending sector has so far remained fragile, as reflected in monthly Household Spending data (Month-over-Month) which fell 2.8 percent, worse than the 1.5 percent decline forecast and continued the previous month's bad trend of weakening 1.2 percent.

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Fragile consumer sentiment, sluggish wage growth and global inflationary pressures are the main factors weighing on the purchasing power of Japanese consumers at the moment. In addition, the restrictions that were re-imposed by the government put pressure on economic activity, which impacted spending trends.

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"Prices will outpace wage increases from now on, so we expect consumption to continue in a sluggish fashion going forward. Meanwhile, spending on services is expected to increase from April onwards. However, it is likely that higher prices will weigh on other consumption sectors," said Takeshi Minami, chief economist at the Norinchukin Research Institute.

For information, the real wages just released this afternoon show an increase of 1.2 percent on an annual basis. Nevertheless, these gains were relatively stagnant when adjusted for inflation. This condition raises concerns for BoJ policy makers, which so far have only focused on inflation. Stagnant wages amid rising global inflation is expected to threaten Japan's economic growth.

USD/JPY Moves Consolidatively

Broadly speaking, the release of Japanese household spending data this afternoon did not have a major impact on the movement of the Yen currency against the US Dollar. The USD/JPY pair is currently in the range of 122.50 or weakening 0.22 percent on a daily basis. Technically, the yen is still consolidating after hitting its weakest record since 2015.