Japan Household Expenditure and Monetary Policy Expectations
Key Japanese household expenditure figures are set to influence expectations of a potential Bank of Japan rate hike in the fourth quarter and may impact the USD/JPY currency pair.
Economists' Forecasts and Consumer Spending
Economists forecast a 3% month-on-month decline in June household spending, following a 4.6% increase in May. A significant reduction in consumer expenditure could temper optimistic bets on a policy adjustment by the BoJ later in the year. Diminished consumer spending might also slow inflation driven by demand, given that private consumption constitutes over half of Japan's GDP.
Wage Growth and Consumer Activity
However, rising wages could mitigate some of the spending slowdown, potentially supporting consumer activity into the third quarter. June saw average cash earnings grow by 2.5% year-on-year, up from 1.4% in May. Increased wages may enhance household disposable incomes, fostering consumer spending.
Comments on Wage Increases
East Asia Economics commented on wage increases, noting:
"The spring wage negotiations have elevated full-time regula...