Apr 07 (Japan Times) - Japan’s longest run of economic expansion since the 1980s asset bubble may be entering a turning point, with data out on Friday suggesting consumption will fail to drive growth if trade frictions undermine exports.
Household spending shrank 0.9 percent in February from a year earlier — the biggest drop since a 1.4 percent fall in April last year — while inflation-adjusted real wages fell for a third straight month in February, undercutting consumer buying power.
A slowdown in consumption would be an additional headache for policymakers, who fret that the yen’s recent rises and fears of a trade war could hurt the export-reliant economy.
“External demand and consumption aren’t very strong, so economic growth may have ground to a halt in the first quarter,†said Takeshi Minami, chief economist at Norinchukin Research Institute.
“The strong yen could hurt exporters’ earnings. That’s a concern because companies won’t raise wages, which means consumption won’t fire up.â€
Unusually cold weather kept consumers at home and heavy snow led to a spike in vegetable prices, which discouraged households from spending on non-necessities in February, analysts say.
The drop in spending confounded a median market forecast for a 0.3 percent gain and followed a 1.9 percent rise in January.
