Japan’s household spending massively beats expectations, boosting case for further BOJ hikes

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Japan’s household spending massively beats expectations, boosting case for further BOJ hikes

A customer picks up a snack at a supermarket store in Tokyo, Japan, on Tuesday, July 27, 2021.

Noriko Hayashi | Bloomberg | Getty Images

Japan’s household spending in December rose 2.7% year on year in real terms, according to a Friday

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, massively beating expectations from economists polled by Reuters and marking its first rise since July 2024.

The figure sharply beat Reuters expectations of a 0.2% rise, boosting the case for another interest rate hike from the Bank of Japan.

The data comes after the BOJ raised its benchmark policy rate to 0.5%, its highest since 2008. The BOJ has long stated that it would raise rates if it sees a “virtuous cycle” of higher prices and growing wages.

On Thursday, BOJ board member Naoki Tamura said that it was “necessary” for the BOJ to raise short-term interest rates to “

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. Japan’s 2025 fiscal year ends on March 31, 2026.

Japan’s upcoming spring wage discussions, also known as the “shunto” negotiations, will be in focus for investors watching the BOJ’s interest rate moves. The negotiations will start some time in February,

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larger companies

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The head of the Japanese Trade Union Confederation, or Rengo, said in January that annual pay increases for Japanese workers in 2025 must be higher than the 5.1% growth last year because real wages continue to fall, 

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.

Data from the country’s

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revealed that real wages have fallen for the past three years, with real wages dropping 0.2% year on year in 2024.

Rengo President Tomoko Yoshino reportedly said the labor organization is formally seeking wage increases of at least 5% in this year’s “shunto” wage negotiations.

To ensure incomes of workers at smaller firms do not fall behind those in ******* ones, Yoshino said there should be a hike of at least 6% for the former.

— CNBC’s Lee Ying Shan contributed to this report.

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