Recap: Japan household spending drops sharply, adding pressure ahead of BOJ rate decision
Japan's household spending dropped sharply in October, falling 3.0% year-on-year, raising concerns about consumer demand resilience. This decline comes as the Bank of Japan considers a rate hike amid persistent inflation and a weak yen. The spending weakness was noted in food, leisure, and auto-related areas, but overall demand is still in a recovery stage. Economists caution that soft consumption may limit the pace of rate tightening beyond December.
Japan’s household spending fell at its fastest pace in nearly two years in October, raising fresh concerns about the resilience of consumer demand just as the Bank of Japan prepares for a potential rate hike this month.
Government data showed spending fell 3.0% y/y, the first drop in six months and far worse than the expected 1.0% rise. Month-on-month spending slumped 3.5%, versus forecasts for a modest gain.
Officials said weakness was concentrated in food, leisure and auto-related spending, though cautioned it is too early to conclude that consumption has stalled, noting overall demand remains in a “recovery stage.”
The figures arrive at a crucial moment for the BOJ. While policymakers have kept rates unchanged since January to assess the impact of U.S. tariffs, persistent inflation and a weak yen have pushed the board toward supporting a December (19th) hike. Economists warn, however, that soft consumption could limit the pace of any tightening beyond this month.
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Earlier:
- BOJ secures support for December hike but long-term rate path remains unclear
- Japan metalworkers union seeks bigger wage hikes, reinforcing BOJ rate-hike expectations
- Japan finmin Katayama: Will closely monitor market developments (plus wider comments)
