BOJ Hikes Rates Despite Soft Household Spending in Japan

Japan's household spending has seen its worst decline in over 18 months, according to recent data. In July, household spending dropped by -3.6% year-over-year, marking the biggest decrease since January 2024.

This drop was predicted to be around -1.6%, but it actually turned out to be worse than expected at -3.3%. The Bank of Japan's (BOJ) decision to raise interest rates is seen as a response to rising inflation and yields, rather than strong household spending.

The BOJ has already priced in most of the rate hike, with around 87% being accounted for, mainly driven by inflation and yield concerns. This means that weak household spending doesn't necessarily contribute to the decision-making process behind the rate hike.