MNI BRIEF: BOJ Sees Solid Consumption Despite Weak Signs

Bank of Japan officials believe the recovery of private consumption will remain firm despite high prices, which will support an economic recovery, MNI understands.

Continuous solid spending will drive firms to raise prices and strengthen the wage- and price virtuous cycle. Nominal wages have continued to rise but real income remains in negative territory amid price rises, which has impeded some spending.

Bank officials note government wage data was weak in June, compared with the past few months, but they expect real income to increase and move toward positive territory as hefty wage hikes over Q2 2023 are incorporated into wage data in the coming months. Recent data showed consumers are shifting to cheaper products and sales at some companies that raised prices are falling, putting pressure on firms to consider lowering prices.

The pace of corporate pass-through of cost increases has also slowed, but bank officials remain uncertain as to whether businesses plan to lower retail prices. Bank officials will focus on how planned food price hikes of more than 2,000 items in Sept, and the price revisions expected every Oct, will impact private consumption.