Japan's real household spending was nearly flat in April, down a slight 0.1% on year, on lower costs for funerals, funds sent to students studying away from home and gift money, coming in much weaker than the consensus call of +0.9%. It followed an unexpected gain (+2.1%) in March and a 0.5% dip in February (+1.8% if the boosting impact of the Lunar New Year in February 2024 was excluded).

The April dip was mostly offset by higher expenditures on private middle school tuition fees and home facilities as well as auto insurance premiums and a rebound in purchases of vehicles from a slump in early parts of 2024 when the Toyota Motor group suspended output and shipments over safety inspection scandals. Spending on foodstuffs posted its first y/y gain in eight months as an earlier surge in fresh vegetable prices had eased.

The core measure of real average household spending (excluding housing, motor vehicles and remittance), a key indicator used in GDP calculation, dipped 0.1% on the year after rising 2.7% the previous month, when overall spending rose 2.1%.

On the month, real average expenditures by households with two or more people plunged a seasonally adjusted 1.8% (vs. consensus -1.0%) after rising 0.4% in March and unexpectedly soaring 3.5% in February following a 4.5% plunge the previous month

The average real income of households with salaried workers was unchanged on year in April after three months of decline including a 2.0% drop in March. The average real income of the primary bread earners posted its third straight fall, down 0.3%, after falling 0.5% in March and posting its first drop in five months (-0.1%) the previous month. Their spouses' average income slipped 8.8% after slipping 5.2% previously.

In another set of data released by the labor ministry, total monthly average cash earnings per regular employee in Japan posted their 40th straight year-on-year rise, up a nominal 2.3% in April, after rising a revised 2.3% in March. Base wages rose 2.2% on year following a 1.4% gain the previous month. Real average wages slumped 1.8% for the fourth straight year-on-year decline after falling at the same rate in March.

Japan's real household spending is forecast to slow down sharply to a 0.9% rise on the year in April after posting an unexpected gain in March, up a solid 2.1%, and slipping 0.5% in February (+1.8% if the boosting impact of the Lunar New Year in February 2024 was excluded). Consumers remain wary of spending beyond necessities amid elevated food and energy costs and falling real wages. Demand for spring and summer clothing was dented during most parts of the month until an unseasonal heat wave hit many regions in late April while cosmetics sales were strong ahead of price hikes for some brands.

On the month, real average expenditures by households with two or more people are expected to fall a seasonally adjusted 1.0% after rising 0.4% in March and unexpectedly soaring 3.5% in February following a 4.5% plunge the previous month.

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.