–Household Spending Seen Sluggish amid Rising Costs, Producer Inflation Accelerating on Mideast Conflict
By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week. Trading returns to normal after the Golden Week holidays that ended on Wednesday, May 6. Government policymakers have also returned from international meetings and diplomatic visits.
The focus is on a three-day visit to Tokyo by U.S. Treasury Secretary Scott Bessent, starting Monday. News reports said Bessent will discuss economic and financial issues with Prime Minister Sanae Takaichi, Finance Minister Satsuki Katayama and Bank of Japan Governor Kazuo Ueda in separate meetings. Bessent will join President Donald Trump for a meeting with Chinese President Xi Jinping in Beijing, set for May 14-15.
The Treasury secretary is expected to discuss ways to curb speculative buying of the U.S. currency against the yen, the Nikkei business daily reported last week. The weak yen is fueling inflationary pressures that have been rekindled by the Iran war and the effective blockade of the Strait of Hormuz at the mouth of the Persian Gulf, choking oil and gas exports to the world.
The Ministry of Finance is suspected of conducting rounds of currency market intervention to stop the dollar from rising above the key level of Y160 in thinly traded markets during Japan’s Golden Week holidays.
Tuesday, May 12
0830 JST 0830 JST (2330 GMT/1930 EDT Monday, May 11) The Ministry of Internal Affairs and Communications releases March, Q1 average household spending.
Mace News median forecasts: -1.7% y/y (range: -4.3% to +1.6%) vs. Feb -1.8%; 0.0% m/m (range: -1.4% to +0.5%) vs. Feb +1.5%
Japan’s real average household spending is expected to remain weak, marking a fourth straight year-on-year decline, down 1.7% in March, after posting a deeper-than-expected 1.8% drop in February. Consumers have been cautious about spending beyond necessities amid falling real wages. There is also a widespread move to switch to more affordable mobile communications plans.
Retail sales posted a modest 1.7% rise on year in March, propped up by demand for spring clothing at department stores, a pickup in auto demand and usual suspects of drugs/cosmetics, after slipping 0.4% in February in payback for a high level of auto sales in February 2025 and a 10th straight drop in fuel sales. Government subsidies continued depressing fuel prices in March.
Department store sales posted the third straight year-on-year increase in March, up 3.2%, after rising 1.6% in February, led by solid demand for spring clothing and high-end watches and jewelries. Sales to visitors from overseas marked their first gain in five months as the weak yen boosted their purchasing power. Chinese tourists continued boycotting Japan over bilateral diplomatic rows while spending by visitors from Taiwan, South Korea, Southeast Asia and the United States more than offset the impact of a 20% drop in sales to visitors from China.
On the month, real average expenditures by households with two or more people is forecast to be flat after rising 1.5% in February and falling 2.5% in January.
Tuesday, May 12
0850 JST (2350 GMT/1950 EDT Monday, May 11) The Bank of Japan releases the summary of opinions from its April 27-28 policy meeting at which the nine-member board decided in a 6 to 3 vote to leave the target for the overnight interest at 0.75%. The bank left it unchanged in an 8 to 1 vote at its previous meetings in March and January and conducted its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high in a unanimous vote.
Governor Kazuo Ueda told a post-meeting news conference on why the board stood pat: “To put it simply, the fundamental reason is that the certainty of our core outlook has diminished. Behind this, we must remain vigilant regarding the risk of inflation exceeding expectations and the risk of an economic downturn.”
Asked how long the bank would continue assessing risks before taking action, the governor replied, “We don’t prejudge (before going into the meeting). We will continue reviewing the probability of our outlook and the nature of risks at the next meetings onwards and make appropriate decisions.”
Ueda pointed to the common challenge for major central banks: Both downside risks to growth and upside risks to inflation are getting bigger, making it harder for policymakers to judge how they will evolve. He also said he needs a little more time to have a clearer picture of how the Mideast conflict will affect Japan’s wobbly recovery.
Tuesday, May 12
1400 JST (0500 GMT/0100 EDT Tuesday, May 12) The Bank of Japan releases the March consumption activity index. The supply-side indicator, which has a close correlation with revised GDP data, fell a real 0.2% on the month in February on a travel balance adjusted basis, the first drop in four months, and edged up 0.1% in the January-February period on the final quarter of 2025.
Wednesday, May 13
1400 JST (0500 GMT/0100 EDT Wednesday, May 13) The Cabinet Office releases the April Economy Watchers’ Survey conducted from April 25 until April 30. The April report may show a slight pickup after the indexes plunged in March in light of a spike in energy prices triggered by the Middle East conflict.
The Watchers’ sentiment index indicates the direction of Japan’s current economic climate slumped by 6.7 points to a seasonally adjusted 42.2 in March, hitting the lowest since August 2021 (35.1) after rising to a nearly two-year high of 48.9 in February. The index has stayed under the key 50 line for two years. It was last above the neutral line in March 2024 (50.1).
The Watchers’ outlook index, which projects sentiment in two to three months, plunged by 11.3 points to 38.7 in March, the lowest since December 2020 (37.7),
after slipping to the neutral line of 50.0 in February from 50.1 in January. Last year, the index surged to 52.2 in October from 48.4 in September, returning to positive territory for the first time since August 2024 (50.2).
Thursday, May 14
1300 JST (0400 GMT/0000 EDT Thursday, May 14) Bank of Japan board member Kazuyuki Masu, 67, who joined the board in July 2025, speaks at the Kagoshima Association of Corporate Executives in Kagoshima City, southwestern Japan. Masu worked for the trading firm Mitsubishi Corp. for 40 years. He mainly managed general administration and accounting and was chief financial officer when he retired in 2022.
Friday, May 15
0830 JST (2350 GMT/1930 EDT Thursday, May 14) The Bank of Japan releases the April corporate goods price index.
Mace News median: CGPI +3.2% y/y (range: +2.8% to +3.7%) vs. Mar +2.6%; +1.0% m/m (range: +0.5% to +1.3%) vs. Mar +0.8%
Producer inflation in Japan is expected to accelerate further to 3.2% in April after rising to 2.6% in March from a revised 2.1% in February as the Mideast conflict has a widespread impact on energy and commodities prices. The previous gradual easing trend has ended but the current pace of increase in producer prices is still well below the recent peak of 4.3% hit in each of February and March 2025 (the highest since 4.5% in June 2023).
On the month, the CGPI is forecast to post an eighth straight increase, up 1.0% following a 0.8% gain the previous month in the face of rising fuel costs.
Saturday, May 16
1625 JST (0725 GMT/0325 EDT Saturday, May 16) Bank of Japan Deputy Governor Ryozo Himino, 66, speaks at a spring convention of the Japan Society of Monetary Economics. The past speeches by BOJ governors and deputies at this event have been largely technical. Himino served as the commissioner of the Financial Services Agency, the government watchdog, from 2020 to 2021. He joined the board in March 2022 as one of the two deputies.