Household spending in Japan dropped 6.8 percent in September from a year earlier, the Ministry of Internal Affairs and Communications reported, a far steeper fall than the 3.1 percent decline economists had forecast. On a month-on-month basis, seasonally adjusted spending shrank 2.8 percent, confounding expectations for a 0.3 percent rise.
The figures extend a run of annual declines that the ministry’s data show stretching back ten consecutive years. Spending had already fallen 3.6 percent year on year in July and 3.1 percent in August, so the September reading marks a sharp deterioration rather than a one-off dip.
Context behind the weakness
Household spending data are volatile and drawn from a relatively small sample, which can exaggerate swings from one month to the next. Still, the scale of the September miss stands out against a backdrop in which real wages had been rising.
The sudden spending slump raises questions about how durable that wage-driven resilience will prove.
BoJ policy backdrop
The Bank of Japan held its policy rate at 1.25 percent at its October 30 meeting, in an 8-1 vote.
The central bank said underlying inflation remained broadly consistent with its 2 percent target and judged the risks to prices as skewed to the upside, even as it trimmed its fiscal 2027 growth forecast to 0.7 percent. The Summary of Opinions from the October meeting is due ahead of the full minutes, and markets widely expect a hike in December, following increases the BoJ delivered in June and September.
Related: Japan wages rise 4.6% in September, fastest since 1997
Source: Bank of Japan · Ministry of Internal Affairs and Communications
