–October Household Spending Forecast to Show Only Modest Rise as Inflation for Daily Necessities Continues to Bite

(MaceNews) – Here are the key Japanese economic events for the coming week:

Ahead of the Dec. 18-19 policy meeting, Bank of Japan Governor Kazuo Ueda will deliver a speech in Nagoya, central Japan, to discuss the bank’s latest outlook and risk analysis. He told reporters in late October that he sees a “higher possibility” that the BOJ board’s medium-term growth and inflation outlook will materialize.

In its quarterly Outlook Report issued on Oct. 30, the board left its growth forecasts little changed for fiscal years 2025, 2026 and 2027 (ending in March 2028) while leaving its inflation outlook unchanged for the period. The BOJ said risks to its GDP outlook is skewed to the downside in fiscal 2026 while noting that those to its CPI projection is “generally balanced.”

The BOJ continues to expect Japan’s economy will settle around 2% inflation. Both underlying CPI inflation and the core CPI (excluding fresh food) “will increase gradually and, in the second half of the projection period (fiscal 2025 through fiscal 2027), be at a level that is generally consistent with the (2%) price stability target.”

At its last meeting on Oct. 29-30, the BOJ’s nine-member board decided in a 7 to 2 vote to maintain the target for the overnight interest rate at 0.5% for the sixth straight meeting, as expected, amid uncertainty over the emerging effects of the protectionist U.S. trade policy, geopolitical risks and financial markets. Board members also wanted to see an economic stimulus package by the government under Prime Minister Sanae Takaichi who took office on Oct. 21.

There are growing expectations that the bank will conduct its fourth rate hike during its normalization process, possibly in December or January. The BOJ leadership has been patiently waiting for a better timing for their next rate action in the wake of the global trade war initiated by the Trump administration.

– Monday, Dec. 1

0850 JST (2350 GMT/1850 EST Sunday, Nov. 30) The Ministry of Finance releases Q3 Financial Statements Statistics of Corporations by Industry, key to calculating revisions to July-September GDP due Dec. 8 (capex, inventories).

– Monday, Dec. 1

1005 JST (0105 GMT Monday, Dec. 1/2005 EST Sunday, Nov. 31) Bank of Japan Governor Kazuho Ueda speaks to business leaders in Nagoya City, central Japan. During his annual visit to the commercial and industrial hub in the region, the governor is expected to repeat the recent official statement that the BOJ will continue raising rates if growth and inflation evolve in line with its medium-term outlook.

– Monday, Dec. 1

1400 JST (0500 GMT/0000 EST the same day) Governor Ueda holds a news conference in Nagoya.

Since March 2024, the bank has been in the process of gradually normalizing its monetary policy stance after years of keeping short-term rates near zero percent, and thus board members have noted that real borrowing costs (nominal rates minus inflation) would not be pushed up sharply with a further rate hike.

In making policy decisions in the next few months, one of the key factors for the board is whether they will see early signs that companies in many sectors are likely to maintain a solid pace of wage hikes in the next fiscal year starting on April 1 before major firms settle wage talks with unions from early to mid-March.

BOJ policymakers wish to keep the momentum of gradual rate hikes. The last rate hike was nearly a year ago, in January 2025, when the policy rate was raised to 0.5%. It followed a hike to 0.25% in July 2024 and the bank’s first rate increase in 17 years in March 2024, which ended its seven-year-old yield curve control framework and lifted the overnight interest rate target to a range of zero to 0.1% from minus 0.1%.

– Friday, Dec. 5

0830 JST (2330 GMT/1830 EST Thursday, Dec. 4) The Ministry of Internal Affairs and Communications releases October average household spending.

Mace News median forecasts: +1.6% y/y (range: +0.3% to +2.2%) vs. Sept +1.8%; +0.8% m/m (range: -0.1% to +2.7%) vs. Sept -0.7%

Japan’s real household spending is forecast to rise 1.6% on the year in October,

marking a sixth straight gain but the pace of increase is seen slowing from 1.8% in September, and 2.3% in August and a recent peak of a 4.7% jump in May amid sticky price hikes for food and other necessities. The increase in September was led by vehicle purchases, donations and higher medical expenses. Those gains were partly offset by decreases in funds sent to children studying away from home, mobile communications charges and public housing rents.

Retail sales rose 1.7% on year in October for a second straight increase after edging up a downwardly revised 0.2% in September as demand for drugs and cosmetics remains strong and auto sales saw a rebound. Industry data showed department store sales rose 4.3% for the third straight year-on-year gain in October, driven by high demand for sweaters and overcoats amid the cold weather as well as lingering strength in sales of cosmetics, watches and jewelry.

On the month, real average expenditures by households with two or more people are expected to rise 0.8% in October, following a 0.7% decline in the previous month. The uptrend in October spending is likely supported by stronger sales at

department stores, convenience stores and supermarkets nationwide during the

month.

– Friday, Dec. 5

0830 JST (2330 GMT/1830 EST Thursday, Dec. 4) The Ministry of Health, Labour and Welfare releases October wages.

Real wages posted their ninth straight year-on-year drop in September, down 1.3%, after dipping 1.7% in August while total nominal wages rose at around the trend pace of 2.1% after rising 1.3% the prior month (base wage gains have been more stable at around 2.0%).

– Friday, Dec. 5

1400 JST (0500 GMT/0000 EST the same day) The Bank of Japan releases October supply-side consumption activity index.

The supply-side index marked its first month-on-month rise in September, up a seasonally adjusted 0.5%, after falling 0.1% in August and 0.6% in July. The index dipped 0.6% on quarter in the July-September period after sliding 0.1% in the second quarter and rising 0.9% in the previous quarter. Figures exclude inbound tourism consumption but include outbound tourism spending.