MNI: Japan Govt Official Warns High Prices Risk To Consumption

Japanese private consumption is expected to continue rising on the back of favourable income and sentiment trends but the government continues to keep a close eye on the impact of high prices on spending, a senior official at the Cabinet Office said on Tuesday.

Income and sentiment are improving in the wake of hefty wage hikes this year, so, while the rate of expansion of consumption slowed in the second quarter from the first quarter it is likely to continue growing, she told reporters.

The official, however, warned that the government will monitor the impact of ongoing high prices and stock price moves on spending, noting that there are signs some consumers are seeing cheaper goods as prices rise.

Government data showed that real wages continued in negative territory for the 15th straight month in June as wage hikes failed to keep with price rises.

Japan's economy for the April-June quarter posted the second straight growth in the wake of stronger net exports, although capital investment and private consumption slowed, preliminary GDP data released by the Cabinet Office Tuesday showed.

The Q2 GDP rose 1.5% q/q, or an annualized +6.0% following a revised 0.9% q/q, or an annualized revised 3.7% for the first quarter of 2023.

Net exports of goods and services -- exports minus imports -- made a positive 1.8 percentage point contribution to total domestic output after pushing Q1 GDP growth down 0.3 percentage point.

Private consumption, which accounts for about 60% of Japan's GDP, fell 0.5% q/q in Q2, after a revised 0.6% in Q1. The median forecast was for a 0.1% q/q rise.

Business investment was unchanged q/q in Q2 following a revised 1.8% in Q1. The median forecast was for a 0.4% rise.

Second-quarter GDP was driven by net exports, led by an increase in automobile exports on the back of easing supply-side restrictions and resuming inbound tourism, the official said.

Capital investment slowed in the second quarter as the capex in Q1 was very strong but corporate appetite to implement capex remains firm, although the pace of capex could be affected by ongoing uncertainties, she said.