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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.

A shopper is reflected on a mirror glass as she checks food items at a supermarket in Tokyo, Japan January 20, 2023. REUTERS/Issei Kato/File Photo
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Overview

  • 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.