- Koji Ishida, BoJ board member
Japan's household spending unexpectedly declined and inflation stalled last month, adding to signs the world's third biggest economy may have contracted in the second quarter and questioning the Bank of Japan's view that the growth will recover robustly in the current quarter. Annual core consumer inflation, which includes oil products but excludes volatile fresh food prices, climbed 0.1% in June, slightly beating market expectations of a flat reading. However, core consumer prices in Tokyo, a leading indicator of nationwide inflation, slid 0.1% this month, marking the first annual drop since April 2013.
At the same time, household spending dropped 2.0% in the year to June, after surging 4.8% in the prior month. While the government said rainy weather was the main reason behind reluctance of shoppers to open their wallets, weak demand for cars and housing pointed the increasing cost of living is sapping appetite for big-ticket items. The weak spending data, used for GDP calculations, reinforced views the Japanese economy probably contracted in the second quarter. It also questioned the BoJ's rosy scenario claiming that a tightening job market will underpin wages and boost consumption, helping achieve its price target by around September next year.
© Dukascopy Bank SA