(Bloomberg) — Japan’s households cut consumption for a fourth month as inflation continues to weigh on their purchasing power, showing an economic fragility that’s likely to keep the Bank of Japan cautious about additional rate hikes.
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Outlays adjusted for inflation fell 0.4% in November from a year earlier, compared with the consensus estimate of a 0.9% drop, the Ministry of Internal Affairs reported Friday. The gauge has risen only twice in the past 12 months.
Consumer spending has been on a downtrend for months as shoppers cope with inflation that’s been at or above the BOJ’s price target for more than 30 months. The biggest wage growth in years has yet to change the tide as inflation continues to outpace a boost in paychecks.
In November Japanese workers’ base salaries grew the most in more than three decades, but real wages fell for a fourth consecutive month.
The central bank has signaled caution over the timing of its next interest rate hike, with Governor Kazuo Ueda seeking confirmation that strong wage momentum will carry over into the spring negotiations between companies and labor unions. The BOJ is set to wrap up its next policy decision meeting on Jan. 24.
Even if wage growth stays robust, fragile consumption may give the BOJ another reason to pause, given it indicates a limit to the virtuous economic cycle the central bank is seeking.
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