By Kantaro Komiya
TOKYO (Reuters) – Japan’s household spending fell 3.0% in August from a year earlier, government data showed on Friday, as state of emergency curbs to combat the coronavirus pandemic weighed on consumption during the summer holiday season.
The data bodes ill for new Prime Minister Fumio Kishida’s efforts to revitalise the economy and distribute more wealth to households through higher wages.
The decrease in spending was worse than a median market forecast for a 1.5% drop and followed a 0.7% increase in July.
The month-on-month figures showed a 3.9% contraction in August, the fourth straight month of decline, and compared with expectations for a 2.0% drop.
The spread of the COVID-19 infections and subsequent restrictions nationwide hindered consumption in restaurant dine-ins and a wide variety of goods, a government official said, adding that rainy weather also discouraged customers’ visit to stores.
Consumption has been a weak spot for the world’s third largest economy as a spike in Delta variant cases and state of emergency curbs kept households from shopping or eating out. Japan’s services sector activity shrank for a 20th straight month in September, according to a recent private survey.
But analysts expect consumption to rebound in coming months as the lifting of curbs from October and steady progress in vaccinations heighten hopes of pent-up demand.
The economy, however, faces fresh headwinds from supply constraints, as a shortage of semiconductor chips and parts disrupts automobile production enough to hurt exports.
Separate data on Friday showed inflation-adjusted real wages in August rose 0.2% from the same month a year earlier, largely due to a statistical base effect.
(Reporting by Kantaro Komiya; Writing by Leika Kihara; Editing by Shri Navaratnam)
