Japan Household Spending Declines After Sales Tax Hike

Japan household spending declined notably in October after the government implemented the sales tax hike on October 1, official data showed Friday.

Data from the Ministry of Internal Affairs and Communications showed that household spending decreased 5.1 percent annually in October, in contrast to a 9.5 percent increase in September.

This was the biggest fall since March 2016. Economists had forecast a moderate 3.5 percent fall for October.

On a monthly basis, household spending declined 11.5 percent in October, following a 5.5 percent rise in September.

Total cash earnings rose 0.5 percent year-on-year in October, the same as seen in September, report from the Ministry of Health, Labor and Welfare showed. Economists had expected a 0.2 percent increase. This was also the second consecutive growth.

Contractual gross earnings increased 0.6 percent in October, while special cash earnings declined by 4.4 percent.

Real cash earnings edged up 0.1 percent in October, following a revised 0.2 percent rise in the previous month. Economists had expected a 0.3 percent decline.

Wage growth remained relatively strong in October but with the labor market loosening, earnings growth is likely to settle around 0.5 percent, Tom Learmouth, an economist at Capital Economics, said.

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