Japanese Households Reduce Spending Power Due to Inflation

Japanese families spent less money in July because prices kept going up, and it’s making it hard for people to afford things. This is putting pressure on the government to come up with new ways to help the economy.

In July, people spent 2.7% less money than they did in the previous month, which is the biggest drop since February 2022. They cut back on buying cars and using telecommunications services. Compared to the same time last year, spending was down by 5%, which is twice as bad as what experts expected.

This shows that the Japanese economy is struggling to get better, especially because prices are rising faster than people’s wages, and folks are not spending as much as they did before the pandemic. In July, the prices of things people need every day went up by 3.1% compared to the previous year.

The Prime Minister, Fumio Kishida, wants to help people by giving them subsidies for gasoline, which has become very expensive. He’s also planning to introduce more economic measures in the fall to help the economy.

An economist, Harumi Taguchi, said that people are being careful with their money because of rising prices. While some people got raises in the spring, it didn’t reach everyone, and with things like food getting more expensive, inflation is hitting people hard.

Even though the Japanese economy did better than expected in the second quarter of the year, it was mostly because other countries were buying more Japanese stuff and more tourists were visiting. But people in Japan aren’t spending as much, which is a problem because prices keep going up.

Economists think that the growth number for the economy will be lower when the new data comes out on Friday because companies didn’t spend as much money as they were supposed to. In the next few months, the economy might even get worse.

Because the situation is not great, the Bank of Japan might keep doing things to help the economy, like keeping interest rates very low, until inflation gets under control and wages go up. But this could cause other problems because borrowing money might get more expensive, and Japan already has a lot of debt.

The government wants to spend more money to help the economy, but they need to figure out how to pay for it, especially because they’re also increasing their spending on defense and trying to support families to have more babies.

So, while the government might want to give money to everyone, they might focus on helping people with lower incomes and making things cheaper instead.