Household spending in Japan unexpectedly fell for the first time in six months. The Bank of Japan is currently preparing to consider raising interest rates later this month. This phenomenon highlights the fragility of domestic demand. According to data released by Japan's Ministry of Internal Affairs and Communications on Friday, household spending fell 3% year-on-year in October after adjustment for inflation, mainly hampered by a reduction in transportation and housing expenses. Previously, economists had predicted that figure would increase by 1%. Private spending is a key part of the Bank of Japan's goal of achieving a “virtuous economic cycle,” in which wage growth will drive demand-driven price increases. At present, domestic consumption has been growing for three consecutive quarters, but the growth rate is moderate. The Bank of Japan said in its outlook report released in October that private consumption is likely to remain basically flat, then gradually return to a “moderate upward trend” as “employee income continues to grow.” Although the negative growth data released on Friday will add some complexity to the Bank of Japan's next rate hike, it is not expected to change this overall trend.

Household spending in Japan unexpectedly fell for the first time in six months. The Bank of Japan is currently preparing to consider raising interest rates later this month. This phenomenon highlights the fragility of domestic demand. According to data released by Japan's Ministry of Internal Affairs and Communications on Friday, household spending fell 3% year-on-year in October after adjustment for inflation, mainly hampered by a reduction in transportation and housing expenses. Previously, economists had predicted that figure would increase by 1%. Private spending is a key part of the Bank of Japan's goal of achieving a “virtuous economic cycle,” in which wage growth will drive demand-driven price increases. At present, domestic consumption has been growing for three consecutive quarters, but the growth rate is moderate. The Bank of Japan said in its outlook report released in October that private consumption is likely to remain basically flat, then gradually return to a “moderate upward trend” as “employee income continues to grow.” Although the negative growth data released on Friday will add some complexity to the Bank of Japan's next rate hike, it is not expected to change this overall trend.