Japan Households Slash Their Spending

Hit by a tax hike, lower real wages and higher prices, Japanese households have been cutting back on spending, and the GDP data on Wednesday is expected to confirm they are holding back economic growth.

“Real wages have fallen by around four percent since Prime Minister Shinzo Abe came to power and household spending will be the big swing factor for economic growth going forward,” Capital Economics’ Japan economist Marcel Thieliant told CNBC by phone.

Just when a weaker yen had been pushing up the cost of imported goods, Japanese consumers were hit in April 2014 by the first consumption tax hike in seventeen years.  In response, Japan’s households have been slashing their spending and unwittingly helped tip the economy into a technical recession from which it has struggled to emerge from.


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