DIGIVESTASI - Japan's personal consumption declined for the 13th consecutive month in March 2024. This poses a challenge for regulators looking to further boost real wage growth, which is a prerequisite for further interest rate hikes by Japan's central bank. Quoting Reuters, official data released on Friday (May 10, 2024) showed household spending fell 1.2% year-on-year in March, contrary to the median forecast of a 2.4% decline by economists, and a 1.2% drop from a year earlier. In February, by 0.5%. 

“Due to sluggish consumption, the Bank of Japan seeks to maintain a healthy wage and price cycle until at least October before raising interest rates,” Takeshi Minami, chief economist at Norinchukin Research Institute, was quoted by Reuters on Friday. We have to wait.” (October 5, 2024). 

``Unless there is a currency crisis and capital flight, the Bank of Japan will not raise interest rates to protect the yen.'' Seasonally adjusted monthly spending rose 1.2%, well above expectations of a 0.3% decline and a 1.4% gain in February. The weak figures were released a day after Labor Department data showed real wages had shrunk for the second year in a row, with the cost of living outpacing nominal wages despite the largest wage gains.

This happened over a period of about 30 years, mostly at large companies. ``Consumption may have bottomed out, but the trend toward frugal consumption is still strong, as the rising cost of living may be exacerbated by the weak yen,'' Minami said. 

“Therefore, the private consumption component of the first-quarter GDP data is likely to decline next week, resulting in an overall economic contraction of 1.2% year-on-year in the same period.” 

Weak household consumption is a concern for regulators, who expect economic growth to continue with strong wage growth and solid consumer spending. 

Separate data on Friday showed Japan's current account surplus widened to 3.4 trillion yen ($21.84 billion) in March. This compared with the median forecast of economists polled by Reuters, who expected a surplus of 3.49 trillion yen. 

In the fiscal year ending in March, Japan's current account surplus hit a record high of 25.339 trillion yen, due to a trade surplus, falling commodity prices and a surge in primary income from foreign direct investment.

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