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As prices go up, people in Japan spend less on their homes

Image: Reuters Berita 24 English - In April, Japanese households spent less than expected because the sharp drop in the value of the yen and...

Image: Reuters

Berita 24 English - In April, Japanese households spent less than expected because the sharp drop in the value of the yen and rising commodity prices drove up retail prices. This hurt consumer confidence and put more pressure on the country's already struggling economy.

Spending went up from the month before because people were more interested in services like eating out. However, the increase from month to month was smaller than expected, which shows that the pandemic is still having an effect.

In April, real wages fell at the fastest rate in four months, which is a sign that the economy is in trouble. At the same time, prices rose by the most in more than seven years, which made it harder for people to buy things.

Government data showed that household spending dropped 1.7% in April compared to the same month last year. This was faster than the market's prediction of a 0.8% drop, which was based on a Reuters poll. The drop was caused by less money spent on cars and vegetables.

The month-to-month numbers showed a rise of 1%, which was also less than the predicted rise of 1.3%.

Takeshi Minami, chief economist at Norinchukin Research Institute, said that higher prices for energy and food are having a big effect and making people spend less. "There is still a spending recovery, but it is happening more slowly."

Policymakers are worried that households are taking a bigger hit from rising prices for daily necessities and a weakening yen, which is driving up import costs and making people less likely to spend.

Haruhiko Kuroda, governor of the Bank of Japan, said on Monday that people were becoming more used to price increases. He also said that a weak yen was likely to be good for the economy as long as it didn't move too much.

Early on Tuesday, the yen hit a new 20-year low against the U.S. dollar. At the time of this writing, the exchange rate was around 132.20 yen per dollar.

A government official said that price increases didn't have much of an effect on the drop in food spending because it had already been going down since the spring of last year. This was because fewer people were eating at home.

But the outlook for how consumers feel was very scary, the official said, and it should be kept an eye on.

Inflation-adjusted real wages fell by 1.2% in April, which was the fastest drop in four months. This was because a 3.0% rise in consumer prices was bigger than a 1% rise in nominal wages.

"Structure is the problem. It seems like a problem that can't be ignored that wages and prices aren't going up at the same rate "said Minami.

Japan's economy shrank from January to March, but it is expected to grow again in the current quarter. However, the weak yen and high prices for raw materials and energy are putting more pressure on the economy.

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