MNI: Japan Govt Vigilant Against Weaker Consumption
MNI (TOKYO) - The Japanese government is vigilant against the outlook for private consumption in the first quarter as continued high prices are set to affect consumer sentiment and private consumption adversely, a senior official at Cabinet Office said on Monday.
“Wages are rising but retail prices, particularly food and rice prices... are rising and they play at a tug-of-war. We are attentive to the impact of high prices on sentiment and spending,” the official told reporters.
She noted consumption is determined by income and sentiment and the expected inflation is in inverse proportion to sentiment. She also warned consumer sentiment remained at a standstill for the fourth quarter.
Japan's economy for the October-December period rose 0.7% q/q, or an annualised 2.8%, thanks to strong capital investment and net exports, posting the third straight quarterly growth, preliminary GDP data released by the Cabinet Office Monday showed.
The Q4 growth was stronger than the MNI median forecast that pointed to a rise of 0.3% q/q, or an annualized +0.9%.
Private consumption, which accounts for about 60% of Japan's GDP, rose 0.1% q/q in Q4 for the third straight rise following an unrevised 0.7 rise in Q3.
The senior official said weak private consumption was caused by a combination of soft automobile sales and the reaction to strong spending linked to disaster prevention measures.
She added that the impact of rate hikes by the Bank of Japan in 2024 on corporate sector was limited as businesses are transferring high raw material and labour costs to retail prices and exporters have the benefit of the weak yen.
“The sustainability of favorable corporate sector depends on whether private consumption gains momentum,” she warned, highlighting high prices caused by the cost-push of elevated labour and raw material costs.