Japan’s Household Spending Pick up while Wage Labor Collapse

Japan’s household expenditure in January had rebounded but wage labor had declined at its most rapid pace in six months. This could be a sign that consumption will weaken this year and the longest economic growth will end after 28 years. A set of data published on Friday cleared the uncertainties from the Bank of Japan's positive forecast, that the strengthening recovery will urge companies to increase wages and improve consumption which could help stimulate inflation to its 2 percent target.

According to analysts, the lackluster growth of wages could further trigger market expectations to the possible slackening of the BOJ against its major rivals in terms of stimulus programme revision. The household spending grew by 1.9 percent in January from a year earlier based on the government data issued on Friday, showing a lift from the 0.1 percent decline in December. While the growth was led by higher prices for necessities due to an extreme cold weather that compelled families to purchase additional fuel and medicines.

After the inflation adjustments by 0.9 percent in January from the previous year, another data presented that workers’ wages marked its largest downturn at 1.1 percent in July 2017. The fall indicates that the administration will have a hard time convincing major companies to boost wages by 3 percent or more during the annual talks with the labor unions scheduled next week. Consumption appeared to be weak which restrain the efforts of the central bank in reaching its inflation target while companies continued to be cautious for a price hike due to concerns on households that are very cost-sensitive.