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Japanese household spending posted first rise in six months in July

Kyodo

Households increased spending for the first time in six months in July, government data showed Friday, providing a positive sign in the world’s third-largest economy despite it being just a slight uptick in expenditures.

Spending by households with two or more people edged up 0.1 percent from a year earlier to ¥283,387 ($2,560), despite negative factors such as torrential rain and flooding in western Japan during the month, an official at the Internal Affairs and Communications Ministry said.

Expenditures rose for new cars and mobile phone fees but fell for food and clothing, according to the data.

Household spending is “firm and has mostly leveled off,” the official said, indicating an improvement from the ministry’s assessment the previous month that there were “signs of weakness.” The evaluation was upgraded for the first time in 13 months.

Private consumption, which accounts for more than half of Japan’s gross domestic product, had so far been slow to pick up as slow wage gains kept households from loosening their purse strings.

The country has instead relied on robust exports and capital expenditures, with revised GDP data to be released Monday expected to confirm that Japan’s economy resumed growth in the April-June quarter following a temporary slowdown.

Private-sector economists predict on average that the growth rate will be upgraded to an annualized real 2.7 percent from the initially reported 1.9 percent.

While the latest increase in household spending looks positive for growth in the following quarters, one measure of income worsened in July, somewhat clouding the outlook.

The average income of salaried households with at least two people stood at ¥605,746, down 1.6 percent from a year earlier after adjusting for inflation and seasonality.

That may trouble the Bank of Japan, which is hoping that a rise in consumption will give companies the confidence to raise prices for goods and services and lift inflation toward its elusive 2 percent target.