AUGUST 28 2015 13:28h

Japan household spending down for second straight month

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Tokyo (dpa) – Japan’s household spending fell 0.2 per cent from a year earlier in July for the second consecutive month of decline, the government said Friday.

In May, household spending grew 4.8 per cent after the figure had dropped for 13 straight months since the government raised its controversial sales tax to 8 per cent in April 2014 from 5 per cent.

The government reported last week the Japanese economy shrank at an annualized rate of 1.6 per cent in the April-to-June period despite Prime Minister Shinzo Abe’s economic growth strategy.

Economic Revitalization Minister Akira Amari blamed sluggish consumption and weaker exports for the first contraction in three quarters.

Private consumption, which makes up 60 per cent of output, declined 0.8 per cent, the government said.

Consumer sentiment was hurt by rising prices of food and daily necessities due to a weaker yen and the increased sales tax.

The negative impact of the hike was “larger than expected,” Bank of Japan Governor Haruhiko Kuroda said in a speech in New York Wednesday.

“The tax hike brought about swings in demand and a decrease in real income, both of which resulted in sluggish private consumption,” said Kuroda, a former finance ministry bureaucrat, who had strongly supported the tax increase.

Abe’s Liberal Democratic Party won an overwhelming victory in parliamentary elections in December 2012 after it had vowed to reboot the world’s third-largest economy.

In April 2013, the central bank introduced aggressive monetary easing measures to overcome deflation which has plagued Japan for nearly two decades.

However, consumer prices were unchanged from a year earlier in July amid plunging crude oil prices, the government said Friday.

The figure is far below the 2-per-cent target set by the bank more than two years ago.

The bank said in July it expected consumer prices to rise 0.7 per cent in the year through March 2016, and by 1.9 per cent in the year through March 2017.

 

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