Japan's inflation may miss 2% target amid consumption stagnation

Posted on June 7, 2024   |  

Japan may miss its 2% inflation target if spending remains sluggish, raising doubts about future interest rate hikes.

Household spending has been slow lately despite steady income growth, affecting overall consumption.

Projections from April suggest inflation may stay below 2% from fiscal year 2025 onward if spending doesn't pick up.

While major companies have increased wages, smaller firms, which employ most of Japan's workforce, might struggle to follow suit.

Japan's economy contracted by 2.0% in the first quarter due to reduced spending by both businesses and households.

Analysts expect a rebound in growth this quarter, but a weak yen is increasing import costs for essentials like fuel and food, impacting consumer sentiment.