08.05.201800:30:00UTC+00Japan Household Spending Fell in March

Japanese household spending dropped 0.7 percent in March from the previous year to mark the second consecutive month of declines, highlighting the view the economy suffered a temporary lull in the first quarter as bad weather hurt consumption.

Spending declined 0.7 percent year on year in the third month of 2018, with growth of 0.1 percent in February revised to a fall of 0.9 percent.

The decline in household expenditures adds to earlier evidence suggesting Japan's private consumption dropped in the first quarter, with a March reading for retail sales hitting a drop of 0.7 percent from the previous year.

Wage earners' income fell 3.8 percent in March, posting the third straight consecutive month of declines, in a sign that companies remain wary of raising pay despite reaping record profits from robust global demand.

Weak consumption would be a headache for the Bank of Japan, which hopes that companies will pass on rising costs to households and help drive up inflation to its 2 percent target.

Japan's economy, the world's third largest, has grown for eight consecutive quarters through end-2017, the longest continuous expansion since the 1980s.

However, core consumer inflation stood at 0.9 percent in March from a year earlier, well below the BOJ's target, as slow wage growth keeps consumers from increasing their spending.

Marcel Thieliant, senior Japan economist at Capital Economics, said the latest spending data “suggests that consumer spending declined last quarter and supports our view that [gross domestic product] fell marginally.”

Capital economics has forecast Japan's GDP to contract 0.1 percent quarter on quarter in the first three months of 2018.