Japan Consumer Outlook: Household Spending Remains Stable Despite Decades-High Inflation
Household spending growth is expected to slow in 2023 due to economic challenges. Despite a recovery in retail sales and consumer confidence, inflation is high, causing consumers to prioritize essential expenses. If inflation remains high, it will continue to impact disposable income and discretionary spending in 2024.
Key View: Household spending growth will slow over 2023, as macroeconomic headwinds weigh on households. High frequency data show a continued recovery in retail sales and consumer confidence, as economic recovery picks up and Covid-related impacts fade. However, inflation is the highest in four decades, and the rising cost of living is forcing consumers to tighten their wallets and focus on essentials. While we predict inflation will ease over 2023, should inflation remain sticky and elevated, this would quickly sap disposable income and discretionary spending, affecting consumer spending over 2024.
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