Japanese Household Spending Declines in February Despite Record Wage Hikes

Consumer spending fell 0.5% year-on-year, reflecting inflationary pressures, while companies agreed to the largest wage increases in 34 years.

Japanese household spending fell 0.5% year-on-year in February 2025, the first decline in three months, though the drop was smaller than the forecasted 1.7%.
Month-on-month, seasonally adjusted spending rose by 3.5%, surpassing expectations of a 0.5% increase, with some recovery in areas like package tours.
Food expenditure dropped by 4.5% as consumers opted for cheaper alternatives, highlighting cost-of-living pressures exacerbated by inflation.
Japanese companies announced a 5.42% wage hike for 2025, the largest in 34 years, driven by record profits and labor shortages, though real wages remain under pressure.
The Bank of Japan is closely monitoring spending and wage trends to determine the timing of potential interest rate hikes, while new U.S. tariffs add uncertainty to the economic outlook.