Japan Household Spending Falls at Fastest Pace in Over Two Years

Japanese household spending fell at its fastest annual pace in over two and a half years in July, according to government data released on Friday. The decline of 3.6% year-on-year marked an eighth consecutive month of decreased consumer spending.

The internal affairs ministry reported that this fall is the steepest since January 2024, when spending dropped by 6.3%. On a seasonally adjusted basis, however, spending edged up 0.5% from June to July.

Experts point out that consumers are becoming increasingly selective in their spending habits, opting for entertainment and household goods while cutting back on food and transportation costs. Analysts also note that higher prices are taking a toll on consumption, with little sign of relief in sight.

The Bank of Japan will closely scrutinize this data as it considers whether to raise interest rates, but the decline itself is unlikely to heavily influence the decision.