Japan's July household spending rises less than expected

By Kantaro Komiya and Daniel Leussink

TOKYO (Reuters) – Japan’s household spending grew less than expected in July as a resurgence of COVID-19 cases hindered consumer activity, throwing broader economic recovery prospects into doubt.

The world’s third-largest economy is struggling to shake off the impact of the coronavirus pandemic, which forced the government to impose new state of emergency restrictions that now cover about 80% of the population.

Household spending rose 0.7% year-on-year in July, after a revised 4.3% fall in June, government data showed on Tuesday. That was weaker than a median market forecast for a 2.9% gain in a Reuters poll.

The modest rise was partly due to a sharp contraction in July last year, when household spending slumped 7.6% year-on-year as consumers delayed spending on things such as travel and overnight stays due to the health crisis.

The month-on-month figures showed a 0.9% contraction in July, the third straight month of decline, the internal affairs ministry data showed, dashing expectations for 1.1% growth.

Separate data on Tuesday showed inflation-adjusted real wages in July rose 0.7% from the same month a year earlier, though the gain was also because of a flattered comparison with last year’s steep pandemic-driven drop.

But the data was unlikely to dispel worries that Japan’s economy is at risk of slowing down in the third quarter, as explosive growth in COVID-19 cases at home and in other parts of Asia weighs on consumer and corporate activity.

Revised gross domestic product (GDP) data on Wednesday is expected https://www.reuters.com/world/asia-pacific/japan-seen-upgrading-q2-gdp-stronger-business-spending-2021-09-03 to show the economy grew faster than initially reported in the second quarter, helped by stronger business spending.