Declining household spending weighs on Japan’s economy — Bloomberg

In April, Japanese household spending unexpectedly dropped as high inflation curbed discretionary purchases. The decline served as a worrying sign for policymakers amid an economic downturn that had begun even before US tariffs took full effect, Bloomberg reports.

According to Japan’s Ministry of Internal Affairs and Communications, inflation-adjusted household spending fell 0.1% year-on-year in April, missing forecasts of a 1.5% increase. The sharpest decline was seen in healthcare expenditures, while housing costs jumped 10.9%.

As noted by Bloomberg, household spending has been a key driver of Japan’s economic growth amid declining industrial production and weakening exports, both hit by US tariff policies. Now, the trajectory of consumer activity will determine whether the country can recover from its GDP contraction in the first quarter and avoid slipping into a technical recession.

According to Takeshi Minami of Norinchukin Research, rising living costs are forcing Japanese households to cut back on spending. Inflation accelerated to a two-year high in April, having now remained above the Bank of Japan's 2% target for over three consecutive years.