Japan Household Spending Drops 6.8% as Takaichi Cuts Food Tax
Prime Minister Sanae Takaichi introduced a food sales tax cut after Japan's inflation-adjusted household spending fell 6.8% in September, the sharpest decline since 2020.
Japan's inflation-adjusted household spending fell 6.8% in September from a year earlier, marking the sharpest decline since 2020. The Japanese Ministry of Internal Affairs and Communications reported that the slump was driven by reduced spending on transport, education, and entertainment, significantly exceeding economist forecasts of a 3% drop.
This decline persists despite a rise in nominal cash earnings of 4.6%, the largest gain since 1997, and a 2.2% increase in real wages. The divergence between wage growth and actual consumption creates a policy dilemma for the Bank of Japan, which has maintained a benchmark rate of 1.25% while signaling further hikes to combat entrenched inflation.
To counter the weakness in consumption, Prime Minister Sanae Takaichi introduced cost-of-living measures. These include a plan to reduce the sales tax on food from 8% to 1% for two years, starting in April.
