June 29, 2018 / 5:36 AM / 22 days ago

Japan's May household spending set to fall for fourth straight month: Reuters poll

TOKYO (Reuters) - Japan’s household spending is forecast to fall for a fourth straight month in May, a Reuters poll showed on Friday, adding to worries about weak consumer expenditure that sent the economy into a first-quarter contraction.

A man looks around a shop selling tableware in Tokyo, Japan March 7, 2018. REUTERS/Kim Kyung-Hoon

The median forecast of 16 economists suggested household spending declined 1.5 percent in May from a year ago following a 1.3 percent fall in April.

Rainy weather in May discouraged consumers from leaving their homes for shopping and dining out, and higher energy costs made them budget more carefully, poll respondents said.

“Sales of summer items did not perform well and price gains in gasoline and electricity prompted people to be more budget-minded,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

“We expect consumer spending will stay at a standstill.”

Despite Japan’s tight labor market, slow wage growth and slack consumer spending keep inflation momentum extremely low.

Japan’s jobless rate hit its lowest in more than 25 years in May and the jobs-to-applicants ratio was at the highest since 1974.

“Wages are improving at a slow pace but consumer spending is quite behind. Recent intensifying trade disputes make companies cautious about the outlook for the economy, which could make them reluctant to raise wages,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

The internal affairs ministry will release the household spending data at 8:30 a.m. on Friday July 6 Japan time (2330 GMT on July 5).

The BOJ will conduct a quarterly audit of its projections at a rate review in July and will examine whether recent weakness in consumer prices is temporary by looking at the output gap and inflation expectations.The output gap measures the difference between the economy’s maximum potential and its actual output and is widely studied by central banks for insights into inflation.

Economists expect the economy to recover in April-June from the first-quarter contraction that ended the longest run of growth since the 1980s bubble economy.

Reporting by Kaori Kaneko; Editing by Eric Meijer

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