• Kyodo

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Japan’s household spending rose a real 0.7% in July from a year earlier, up for the first time in two months following a steep drop a year ago, but the pace of increase was slow amid a resurgence of COVID-19 infections, government data showed Tuesday.

Average spending by households with two or more people was ¥267,710 ($2,400), the Ministry of Internal Affairs and Communications said, rebounding from a 7.6% plunge a year earlier.

“The increase was quite small, so it would be better to regard it as almost flat compared to the previous year,” a ministry official told reporters, citing a resurgence of infections and the government’s fourth virus state of emergency for Tokyo as possible reasons for the limited growth.

The increase followed a revised decline of 4.3% in June. The June figure was revised from a 5.1% fall following a change in the calculation method for the consumer price index released by the ministry.

Amid a surge in new COVID-19 cases driven by the highly contagious delta virus variant, the ongoing state of emergency was declared in mid-July for Tokyo, while Okinawa Prefecture has been under a state of emergency since late May.

Consumer spending is reduced under the emergency regulations as people have been asked to stay home, while restaurants and bars are requested to refrain from serving alcohol and must close by 8 p.m.

On a month-to-month basis, seasonally adjusted spending in July fell 0.9% in the third consecutive month of decline, with the ministry official saying that household spending “has yet to recover to pre-pandemic levels partly due to a virus resurgence.”

The average monthly income of salaried households with at least two people in July fell a real 2.2% to ¥668,062, down for the third month in a row, mainly due to the government’s across-the-board cash handouts of ¥100,000 per person last year to soften the economic blow of the pandemic.

Household spending is a key indicator of private consumption, which accounts for more than half of Japan’s gross domestic product.

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