Japanese spend more despite falling real wages

Japanese household spending increased 1.1% in October compared with the previous month. In contrast to the previous year, spending increased by 1.2%, thereby exceeding analysts' forecasts.

Although households' purchasing power is declining amid rising inflation, the release of pent-up demand is supporting the economic recovery. This is what spending data says. According to economists, GDP growth will resume in Japan this quarter. The fall in the Japanese currency has hurt businesses and households in the country. As a result, there was an unplanned contraction of the economy in the last quarter.

According to Yoshiki Shinke, an economist at Dai-Ichi Life Research Institute, the current result is quite good and indicates an increase in consumption. He also added that inflation is really reflected in the decline in consumption. However, the response to reduced spending during the coronavirus outbreak currently exceeds the impact of inflation on the economy.

As a separate report showed, the drop in real wages turned out to be the highest since 2015, showing a seventh consecutive month of decline. The real decline is 2.6% with a nominal growth of 1.8%.

Nominal wages have not kept pace with soaring inflation. In October, price growth in Japan reached its highest value in forty years, accelerating in November.