Business / Economy

Households boosted spending at fastest pace in three years in August on back of summer bonuses

Kyodo

Japanese households increased their spending at the fastest rate in three years in August as consumers made more costly purchases, government data showed Friday.

Spending by households with two or more people rose 2.8 percent from a year earlier, after adjusting for inflation, to ¥292,481, the largest increase since August 2015, the Internal Affairs and Communications Ministry said.

It was the second consecutive month of gains following a 0.1 percent increase in July, prompting the ministry to say household spending is “beginning to pick up,” an improvement from its assessment the previous month that it was “firm and has mostly leveled off.”

Spending on durable goods such as cars and refrigerators climbed. Expenditure on air conditioners also rose due to a blistering heat wave that took hold across the country.

Households also paid more for supplementary education such as cram schools, but at the same time spent less on domestic travel and lodging.

A sustained pickup in private consumption, which accounts for more than half of economic activity in Japan, is seen as crucial for the world’s third-largest economy’s continued expansion after it logged a robust 3 percent annualized real growth rate in the April-June quarter.

But slow wage gains have been a limiting factor as companies opt to invest in factories and equipment rather than give workers pay raises. The average income of salaried households with at least two people actually fell 0.6 percent in real terms in August to ¥510,437, the data showed.

Tepid wage growth has hindered the Bank of Japan’s efforts to lift inflation toward its 2 percent target, leading it to make changes to monetary policy in July designed to allow the prolonging of its large-scale easing measures.