| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 1.9% | 1.2% to 2.5% | 3.7% | 1.6% |
| Year over Year | -2.3% | -2.6% to 0.3% | -0.4% | -0.5% |
Highlights
Japan’s real average household spending posted the sixth straight year-on-year drop in May but the pace of decline was a slight 0.4% (consensus -2.3%) as the effects of a pullback in automobile purchases and a drop in domestic traveling were partly offset by strong demand for air conditioners amid hot weather and ahead of April 2027 when the government is scheduled to introduce stricter energy saving standards. The firmer-than-expected May spending, which rose 1.4% in nominal terms, was also due to higher costs of funerals and widespread markups in private university tuition fees.
Autos and related items, a widely fluctuating category, pushed down overall spending by 2.30 percentage points after raising April expenditures by 1.42 points. Excluding home maintenance and repairs and other volatile items like vehicles and gift money, the core measure actually rose 2.6% (up 4.3% in nominal terms) after falling 2.0% (down a nominal 0.5%) the prior month.
The strength was also seen in the seasonally adjusted expenditures index, which surged 3.7% on the month to a 12-month high of 101.7 in May after rising 1.6% to 98.1 in April and falling 1.3% to 96.6 in March.
Real income growth is subdued in the face of elevated costs for daily necessities, although processed food price hikes have continued to ease and subsidies have capped fuel price rises. The May report showed spending on foodstuffs marked the first increase in four months in real terms, up 2.4% on year (+6.0% in nominal terms), as people spent more on restaurant meals and takeout food. Rising stock markets and substantial wage hikes by large firms appear to have propped up consumer sentiment.
On the supply side, official data released last week showed that retail sales surged 5.3% rise on the year in May, coming in much stronger than expected and hitting the highest pace since 5.4% in November 2023. Demand for vehicles, particularly used ones, continued to pick up, booming stock prices prompted consumers to shop for luxury goods and hot weather appeared to have boosted sales of air conditioners and fans.
Industry data showed department store sales posted their fifth straight year-on-year increase in May, up 8.3%, accelerating from a 5.2% gain in April, as spending by visitors from overseas marked a double-digit percentage jump (+16.7%) as seen in the previous month (+18.3%). There was one more public holiday and one more Sunday compared to a year earlier, which led to solid sales to domestic customers.
Details:
Japan May real household spending -0.4% y/y (Apr -0.5%), 6th straight fall; median forecast -2.3% (range: -2.6% to +0.3%)
Japan May real household spending s/a +3.7% m/m (Apr +1.6%), 2nd straight rise; median forecast +1.9% (range: +1.2% to +2.5%)
Japan May household spending y/y slight fall led by pullback in auto purchases after recent pickup, drop in domestic package tours
Japan May household spending sees rises in funeral costs, private university tuition fees; demand for air conditioners also supports spending
Japan May real core household spending (ex-housing, vehicles, gift money) +2.6% y/y vs. -2.0% in Apr when overall spending fell 0.5%
Japan May average real household income +0.7% y/y (Apr +2.3%); +2.4% in nominal terms (Apr +3.8%)
Market Consensus Before Announcement
Japan’s real average household spending is expected to post a sixth straight year-on-year drop in May, down 2.3 percent, after a slight 0.5 percent dip in April, as consumers remain cautious amid elevated costs of living. It is also in payback for a 4.7% jump in May 2025, which was driven mainly by vehicle purchases after the supply of new vehicles had recovered from suspended output at Toyota group factories over safety check scandals. At the time there was also post-pandemic pickup in eating out and strong demand for air conditioners.
The Mideast conflict and the depreciation of the yen have kept import and production costs high, which are expected to have more spillover effects on consumer prices in coming months. The average real wages have crawled above year-earlier levels in recent months as large firms are raising wages to secure qualified employees but those working for smaller firms feel the pace of pay increase is not catching up with inflation.
The expected decrease is likely to be partly offset by solid replacement demand for air conditioners ahead of April 2027 when the government is scheduled to introduce stricter energy saving standards.
On the month, real average expenditures by households with two or more people are forecast to market another month of a strong gain, up 1.9 percent, after rising 1.6 percent in April, slumping 1.3 percent in March and rebounding 1.5 percent in February.
Definition
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.
Description
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.