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Japan Household Spending Falls for Fourth Month Despite Rising Wages

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Japan Household Spending Falls for Fourth Month Despite Rising Wages

Japanese households cut back on spending in March, even as wages continued to strengthen, highlighting a widening gap between income gains and consumption, according to government data released Tuesday.

Average monthly consumption spending for two-or-more-person households stood at 334,701 yen, marking a 1.3% decline in nominal terms and a 2.9% drop after adjusting for inflation compared with a year earlier. The decline extended a run of contractions to a fourth consecutive month.

On a seasonally adjusted monthly basis, spending fell 1.3%, compared with expectations for a modest increase, suggesting households remained cautious in the face of lingering cost pressures and weak recovery in discretionary demand.

The spending weakness contrasts with a firmer income picture. Average monthly income for workers' households rose to 557,663 yen, up 6.4% in nominal terms and 4.7% in real terms from a year earlier. The data point to steady wage momentum supported by recent spring labor negotiations, where pay hikes exceeded 5% for a third straight year.

Real wages, a key measure of purchasing power, increased 1% in March, extending gains for a third consecutive month. While that was slower than the revised 2% rise in February, it still marked a continuation of recovery in household earnings after a prolonged period of decline.

The mix of rising wages and weak spending is likely to be closely monitored by the Bank of Japan, which is weighing whether to raise interest rates at its June policy meeting. Policymakers have emphasized that sustained wage growth alongside stable inflation is a key condition for further tightening.

Nominal pay rose 2.7% to 317,254 yen, while consumer inflation used in wage calculations remained at 1.6%, staying below the central bank's 2% target for a third month. Base salaries continued to grow at a pace above 3%, though bonus payments fell after a strong prior month.

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