Japanese household spending slumps for second consecutive month

Analysts blame sales tax hike for spending decline


Household spending in Japan fell for the second consecutive month in November, with analysts blaming the recent sales tax hike.

According to government data, household spending slipped 2 per cent in November from a year earlier, which is worse than a median forecast of 1.7 per cent.

The slump follows a drop of 5.1 per cent in October, which was the biggest fall since March 2016 when spending fell by 5.3 per cent.

From the previous month, spending rose 2.6 per cent compared with the median estimate for a 3.4 per cent gain and was a rebound from the steep 11.5 per cent monthly drop in October.

The world's third-largest economy has been hit by a curb in household spending following the sales tax hike in October. Japan’s government increased the tax rate from 8 per cent to 10 per cent as part of its efforts to reduce the country’s huge public debt.

An increase in consumer spending is needed to boost the economy and help the Bank of Japan achieve its price stability target of 2 per cent.

As a result, analysts predict consumer spending could contract further in the current quarter.

Further bad news for Japan’s economy is a 1.9 percent fall in export growth in the year to November, due to slowing external demand and the US-China trade dispute.

Japan launched a $122bn fiscal stimulus package last month, as the country seeks to revive GDP growth. It is also hoped the money will sustain economic activity beyond the 2020 Tokyo Olympics.

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