Income growth supports recovery of Japanese consumption

The growth in retail sales slowed slightly in July, but a strong labour market and the rise in aggregate wages should continue to boost consumer spending.


Following a strong rebound in Q2, the momentum behind consumer spending in Japan seems to have moderated somewhat in July. Retail sales in Japan grew by 1.9% y-o-y, down slightly from 2.2% in June and 2.5% in Q2.

Despite the softer momentum, the recovery in Japan’s consumer sector, which started roughly in the second half of 2016, may endure.

Total employment in Japan has increased by 2.8 million since 2013, resulting in a notable increase in aggregate employee compensation.

With the global economy continuing to show solid growth momentum, and with Japanese corporates starting to increase capital investment, it’s likely that the positive trend in the Japanese labour market will last longer. This should provide continued support to the recovery in consumer spending.

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