Japanese household spending rose in April for the first time in 14 months, with a 0.5% increase compared to the previous year. The rise in spending was attributed to increased spending on food, clothes, and transport [f2552a54].
In addition to the increase in household spending, Japan's largest business group, Keidanren, reported a rate of wage increases among major companies at 5.58%, the highest in 33 years. Wage growth is a key part of the Bank of Japan's strategy to achieve demand-driven inflation of 2% [f2552a54].
The Bank of Japan is set to make a decision next week on its ultra-loose monetary policy. Inflation in Japan has been more moderate compared to other major economies, and the Bank of Japan's long-standing, ultra-loose monetary policies aim to combat stagnation and deflation. However, there is speculation that the Bank may change its policy to a tightening direction in the next few months [f2552a54].
The Bank of Japan's key measurements of underlying inflation in April all fell below its 2% target for the first time since August 2022. The weighted median inflation rate rose 1.1% in April from a year earlier, the trimmed mean index rose 1.8%, and a third index measuring inflation with the highest density in the distribution rose 1.6%. The data cast doubt on the BOJ's view that price rises are broadening beyond those driven by rising raw material costs, and likely to be sustained backed by robust domestic demand [8a124c1e].