Household spending rose for the ninth straight month in August, offering some relief for Japan’s export-dependent economy amid weak global demand and the protracted U.S.-China trade war.
But separate data released Tuesday showed wages fell for the eighth consecutive month, pointing to further strains on consumers ahead of the increase in the consumption tax on Oct. 1.
The mixed readings will keep policymakers under pressure to announce more fiscal and monetary stimulus measures to shield the economy from recession, analysts say.
Household spending rose 1.0 percent in August from a year earlier, accelerating from a 0.8 percent increase in July but falling short of a median market forecast for a 1.2 percent increase, government data showed.
The ninth consecutive month of gains was the longest such streak since officials began compiling comparable data in 2001.
“Consumption appeared to have been fairly strong in August after weak spending in July, when bad weather kept consumers at home,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“But the outlook isn’t bright,” he said. “Wage growth is weak and the effect of October’s consumption tax hike will begin to show. Consumer sentiment has been pretty gloomy, which means risks to the outlook are tilted to the downside.”
The consumption tax rise, from 8 percent to 10 percent, was considered critical for fixing the country’s tattered finances despite having been delayed twice before.
While the government has taken steps to ease the burden on consumers by offering vouchers and tax breaks, there are fears the higher rate could hurt an economy already feeling the pinch from global pressures.
Real wages adjusted for inflation fell for the eighth straight month in August, raising concerns over private spending.
The unemployment rate remains at record-low levels, but job offers are slowing in a sign the fallout from trade tensions is broadening.
Upcoming data could be hard to read as households may have made purchases ahead of the consumption tax increase, which will inflate consumption data up to September and may lead to a downturn in spending from October onward, analysts say.
The strength of consumption and capital expenditure will be crucial to the Bank of Japan’s decision on whether to loosen monetary policy at its rate review on Oct. 30 and 31.
The central bank has said that while robust domestic demand is making up for the weakness in exports, it stands ready to act if risks heighten enough to derail Japan’s recovery.
Any sign that job growth is peaking also bodes ill for Prime Minister Shinzo Abe’s administration, which has flagged a strong job market as among its biggest policy accomplishments.
Abe pledged Friday to take “all possible steps” if risks to the economy intensified, signaling his readiness to boost fiscal spending if the consumption tax hike triggers a sharp downturn in growth.
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