Japan August household spending jumps, signals steady recovery

TOKYO (Reuters) – Japan’s household spending unexpectedly jumped in August from a year earlier to mark a second month of gains, suggesting a tight job market and steady economic expansion are boosting households’ purchasing power.

While many analysts expect a moderate expansion to continue, some warn that economic growth may slow or even contract in the July-September quarter due to a string of natural disasters.

Escalating global trade frictions also cloud the outlook for the export-reliant economy, which saw business confidence worsen in the three months to September.

Household spending rose 2.8 percent in August from a year earlier, confounding market expectations for a 0.1 percent fall and following a 0.1 percent gain in July, government data showed on Friday.

A tightening job market has gradually increased household income and helped underpin household spending, which makes up roughly 50 percent of Japan’s economic activity.

But consumption has failed to gain enough momentum to prod companies into raising prices, keeping inflation distant from the Bank of Japan’s 2 percent target.

Some analysts warn that flooding rains, typhoons and an earthquake that hit Japan in the third quarter could weigh on growth by disrupting supply chains and keeping households from shopping.

The government plans to compile an extra budget for disaster relief, though any spending likely would not be big enough to have a sizable impact on the economy.

Solid growth in consumption is considered crucial for premier Shinzo Abe, who reshuffled his cabinet after winning a ruling party leadership race last month, to proceed with a scheduled increase in the sales tax next October.

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