Japan household spending sees steep drop

Japan's household spending dropped nearly four per cent in May from a year earlier, government data showed Friday, underlining an on-going lack of appetite for consumption in the world's third-largest economy.

The country's household spending fell 3.9 per cent in May, far worse than market expectations of a 1.5 per cent decline, the internal affairs ministry said.

The drop marked the fourth consecutive monthly decline, and suggests hopes for a rise in consumption are unlikely to be met anytime soon.

The government and central bank have said repeatedly that export-led economic growth in the country's corporate sector would eventually spread to domestic consumption.

But a recovery in spending has been slow, with economists saying salaries are not rising fast enough to drive an appetite for buying.

Consumers were particularly reluctant to spend on eating out, recreation and cultural activities, and clothing and footwear, according to the ministry data.

"It is our consensus that spending is gradually expanding but the upward curve is near flat," Taro Saito, senior economist at NLI Research Institute, told AFP, pointing out that the spending data is notoriously volatile.

The latest data comes a few days after the Bank of Japan's closely watched quarterly business confidence survey showed declines for the second straight quarter.

Japan's economy slid into negative territory for the first time in two years at the beginning of the year, technically ending its longest period of expansion since the "bubble" days of the 1980s.

But the contraction by 0.2 per cent quarter-on-quarter in the January-March period does not suggest a recession, economists say.

Economists argue Japan is on a solid recovery path on the back of a global economic recovery, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm.