MNI BRIEF: Weak Consumption Challenges BOJ Solid Spending View

The Bank of Japan's Consumption Activity Index posted the first m/m drop in two months in June, falling 0.5%, challenging the BOJ’s view that private consumption will continue to increase moderately.

The fall, driven by weak spending on nondurable goods, follows May's 0.8% m/m gain.

The data was in line with remarks by BOJ Deputy Governor Shinichi Uchida who said last week that higher prices and consumption of nondurable goods has been somewhat weak and will impact private consumption. He also said that it is necessary to carefully examine the balance among wages, prices and private consumption. (See MNI BRIEF: Econ. Remains For From 2% Target - Uchida)

The government will release real household spending for June on Tuesday following May's 4.0% drop, the third straight fall. While the data fluctuates month-on-month, BOJ officials are focused on whether the data shows weak spending like the BOJ’s consumption index.