Tuesday, July 7
0830 JST (2330 GMT/1930 EDT Monday, July 6) The Ministry of Internal Affairs and Communications releases May household spending.
Mace News median forecasts: -2.3% y/y (range: -2.6% to +0.3%) vs. Apr -0.5%; +1.9% m/m (range: +1.2% to +2.5%) vs. Apr +1.6%
By Chikafumi Hodo
TOKYO (MaceNews) – Japan’s real average household spending is expected to post a sixth straight year-on-year drop in May, down 2.3%, after a slight 0.5% dip in April, as consumers remain cautious amid elevated costs of living. It is also in payback for a 4.7% jump in May 2025, which was driven mainly by vehicle purchases after the supply of new vehicles had recovered from suspended output at Toyota group factories over safety check scandals. At the time there was also post-pandemic pickup in eating out and strong demand for air conditioners.
The Mideast conflict and the depreciation of the yen have kept import and production costs high, which are expected to have more spillover effects on consumer prices in coming months. The average real wages have crawled above year-earlier levels in recent months as large firms are raising wages to secure qualified employees but those working for smaller firms feel the pace of pay increase is not catching up with inflation.
The expected decrease is likely to be partly offset by solid replacement demand for air conditioners ahead of April 2027 when the government is scheduled to introduce stricter energy saving standards.
On the month, real average expenditures by households with two or more people are forecast to market another month of a strong gain, up 1.9%, after rising 1.6% in April, slumping 1.3% in March and rebounding 1.5% in February.
Many households have been spending less on eating out and offering smaller amounts of gift money at weddings while they have paid higher medical and dental bills in recent months. Inflation is also hurting households. There is also a widespread move to switch to more affordable mobile communications plans.
On the supply side, official data released last week showed that retail sales surged 5.3% rise on the year in May, coming in much stronger than expected and hitting the highest pace since 5.4% in November 2023, as demand for vehicles, particularly used ones, continued to pick up, booming stock prices prompted consumers to shop for luxury goods and hot weather appeared to have boosted sales of air conditioners and fans.
Industry data showed department store sales posted their fifth straight year-on-year increase in May, up 8.3%, accelerating from a 5.2% gain in April, as spending by visitors from overseas marked a double-digit percentage jump (+16.7%) as seen in the previous month (+18.3%). There was one more public holiday and one more Sunday compared to a year earlier, which led to solid sales to domestic customers.
The yen remains stubbornly weak despite rounds of currency market intervention by the Ministry of Finance from late April to early May, which supported the purchasing power of visitors from Hong Kong, Taiwan, Malaysia and Singapore, offsetting a 5% drop in spending by Chinese tourists.