Japan's real household spending fell 1.9% on year in August, after edging up 0.1% in July and falling 1.4% in June, as consumers remain generally frugal amid rising costs for necessities and a powerful typhoon and rain storms forced some stores to close.

The decline was smaller than the median economist forecast of a 2.7% drop and it was mainly caused by volatile factors of vehicle purchases and spending on home repairs and maintenance, which pulled down overall spending by a combined 2.49 percentage points. A pullback in domestic and overseas package tours also made a negative 0.51-point contribution.

Those factors were partly offset by continued solid expenditures on eating out at bars and Japanese restaurants, which pushed up overall spending by 0.58 point, and slightly more generous post-pandemic spending on weddings and funerals (+0.53 point). People also paid more on rice and cup noodles amid a rare rice supply shortage in Japan.

The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, was nearly flat, down just 0.1% after dipping 0.8% in July and rising 1.3% in June for the first increase in 16 months.

On the month, real average expenditures by households with two or more people rebounded 2.0% in payback for a 1.7% plunge in July, when the killer heat wave intensified. It came in much stronger that the consensus call of a 0.5% gain.

The average real income of households with salaried workers rose 2.0% in August for the fourth straight year-on-year gain after rising 5.5% in July and 3.1% in June. In nominal terms, the average income grew 5.6% following increases of 8.1% in July and 6.5% in the prior month. This continues to indicate that a high pace of wage growth by Japanese standards is spreading to smaller firms that employ about 70% of the workforce.

Japan's real household spending is forecast to slump 2.7 percent on year in August, after edging up 0.1 percent in July and falling 1.4 percent in June, as consumers remain generally frugal amid rising costs for necessities and a powerful typhoon and rain storms forced some stores to close.

On the month, real average expenditures by households with two or more people are expected to rise 0.5 percent after plunging 1.7 percent in July, when the killer heat wave intensified.

Household Spending is an important gauge of personal consumption, which accounts for roughly 55 percent of Japan's gross domestic product. It is part of the monthly Family Income and Spending Report.

The report looks at spending of households and gives a picture of consumer spending. Increases in household spending are favorable for the Japanese economy because high consumer spending generally leads to higher levels of economic growth. Higher spending is also a sign of consumer optimism, as households confident in their future outlook will spend more. The preferred number is the change from the previous year. The data are part of the family income and expenditure survey which is released at the same time as the employment and unemployment data.