Japan's Nov household spending extends declines in sign of weak sentiment

© Reuters. FILE PHOTO: A woman chooses clothes at a shop in Tokyo, Japan, January 23, 2017. REUTERS/Kim Kyung-Hoon

By Daniel Leussink

TOKYO (Reuters) - Japan's household spending posted an annual drop for the fourth straight month in November, a weaker-than-expected reading that threw into doubt hopes that a consumer demand recovery will give a major boost to the economy in the final quarter of 2021.

Household spending fell 1.3% in November from a year earlier, government data showed, much weaker than the market forecast of a 1.6% gain in a Reuters poll.

The month-on-month figures were also negative, losing 1.2%, weaker than a forecast of a 1.2% gain as households remained hesitant to increase spending despite lower COVID-19 infections than during the summer months.

The weak figures raise some concerns for policymakers hoping a rebound in consumer demand will support the economy as companies struggle with higher import cost due to a rise of raw material prices that have fuelled global inflation.

Separate data on Friday showed core consumer prices in Tokyo rose at the fastest pace in nearly two years in December as electricity and fuel cost surged due to higher global energy prices, while prices of overnight stays also increased.

The core consumer price index (CPI) for Japan's capital, which includes oil products but excludes fresh food prices, rose 0.5% in December compared with a year earlier, the biggest year-on-year gain since February 2020, government data showed.

Inflation-adjusted real wages, meanwhile, slumped 1.6% year-on-year in November, falling for the third straight month and boding ill for a stronger economic recovery.

Japan's economy is expected to have grown sharply in the October-December quarter of 2021 after coronavirus cases declined, though the increasing cost of goods and the recent spread of the highly infectious Omicron variant are sowing some doubts for the outlook.