Despite government subsidies and efforts to cap costs, Japan’s households reduced their spending in March due to sticky inflation. Real outlays decreased by 1.2% compared to the previous year, marking the 13th consecutive month of decline. However, this was better than economists’ forecast of a 2.3% drop.
Households have been tightening their budgets as pay increases fail to keep up with the rising cost of living. Real wages have fallen for the 24th straight month in March, while consumer inflation has remained above the Bank of Japan’s 2% target continuously.
Policymakers are hopeful that historic wage hikes in the coming months will help stimulate a recovery in household spending. As Japan continues to grapple with the impact of inflation on consumer sentiment, the focus is on increasing wages to boost economic growth.