Japan’s household spending fell sharply by -3.0% yoy in October, far below expectations for 1.1% yoy increase, and marking the steepest decline since January 2024. It was also the first annual drop in six months.
On a monthly, seasonally adjusted basis, spending plunged -3.5% mom, defying forecasts of a 0.7% mom growth. Lower outlays on food, leisure and automobile-related expenses drove the weakness, though officials said it remains unclear whether the decline represents a one-off setback, noting consumption is still perceived to be in a recovery phase.
The data arrive at a delicate moment for the BoJ. Markets have ramped up bets on a rate hike this month following recent comments from Governor Kazuo Ueda that the Bank would weigh the “pros and cons” of further tightening. The slump in spending, however, introduces fresh uncertainty around the durability of domestic demand—one of the BoJ’s key criteria for normalizing policy continuously.
