Japan Household Spending Falls 3.6% in July, Extending Eight-Month Decline

Japan’s household spending fell 3.6% in real terms in July from a year earlier, marking an eighth straight decline. Average consumption expenditure for households with two or more people was ¥301,245, down 1.5% in nominal terms.

The monthly comparison was less weak, with seasonally adjusted real spending rising 0.5% from June after a 6.3% drop the previous month. On a year-over-year basis, July followed a revised 3.3% decline in June, so the rebound did not break the broader run of weaker real outlays.

The Statistics Bureau’s July Household Survey, released on September 4, shows that the weakness was spread across several spending categories rather than being confined to one part of the household budget. The bureau also noted that real growth rates for January through June had been revised to reflect the consumer price index’s change to a 2025 base.

Transport, housing and utilities led the decline

Transport and communications made the largest negative contribution to the headline result. Spending in that category averaged ¥43,789 per household and fell 8.5% in real terms from July 2025, subtracting 1.29 percentage points from overall real spending growth. The bureau identified automobile-related spending, especially vehicle purchases, as the main drag within the category.

Housing spending dropped 16.4% in real terms to ¥17,291 and reduced the overall growth rate by 1.08 percentage points. Repair and maintenance expenses, including work on exterior walls and fences, were among the main factors. Utilities were also weaker, with spending on fuel, light and water down 9.2% in real terms to ¥18,436, led in part by lower electricity spending.

Food, the largest category by yen amount, averaged ¥95,681 and fell 1.3% in real terms, making a 0.39-point negative contribution. Health care fell 6.0%, education dropped 5.4%, and clothing and footwear slipped 0.3%. Those declines were partly offset by recreation spending, which rose 4.8% in real terms, and household furniture and goods, which edged up 0.7%.

Some of the strongest positive contributions came from services and durable goods. Recreational services, including accommodation, added to spending growth, while dining out also contributed positively. Washing machines and air conditioners supported household durable-goods spending. Even after excluding housing, vehicle purchases, gifts and remittances, however, consumption expenditure was still down 1.4% in real terms, showing that the July decline was not solely the result of a few large, irregular purchases.

Workers’ household income weakened after inflation

Income data in the same survey added to the cautious consumer picture. Average monthly income for workers’ households with two or more people was ¥689,476, down 1.7% in nominal terms and 3.8% in real terms using the consumer price index excluding imputed rent. Disposable income was ¥554,381, 1.0% lower in nominal terms and 3.1% lower in real terms from a year earlier.

The composition of income was uneven. Regular income averaged ¥391,463 and rose 2.2% in nominal terms, leaving it essentially flat in real terms. Income of the household head fell 1.2% nominally and 3.3% in real terms, while a spouse’s income rose 1.1% nominally but declined 1.1% after adjusting for prices. Extraordinary income and bonuses fell 9.6% nominally and 11.5% in real terms, making that component a major drag on the yearly comparison.

Workers’ household consumption expenditure was ¥322,866 in July, down 4.7% nominally and 6.8% in real terms. The average propensity to consume, which measures consumption as a share of disposable income, was 58.2%, compared with 60.5% a year earlier. On a seasonally adjusted basis it stood at 63.0%, up 3.1 percentage points from June, another sign that the monthly and annual comparisons are giving somewhat different readings.

Price pressure remains part of the consumer backdrop

Japan’s consumer price index rose 1.9% in July from a year earlier, while the index excluding fresh food increased 1.8%, according to separate Statistics Bureau data released in August. The persistence of inflation helps explain why nominal and real spending measures can diverge: households spent 1.5% less in yen terms than a year earlier, but after adjusting for price changes the decline was 3.6%.

Sentiment has shown some improvement despite the weak spending data. The Cabinet Office’s August Consumer Confidence Survey put the seasonally adjusted consumer confidence index for households with two or more people at 35.5, up from 34.9 in July. The Cabinet Office said consumer sentiment was showing signs of picking up, although 89.0% of respondents still expected prices to rise over the following year.

The labor market also remains relatively firm. Japan’s seasonally adjusted unemployment rate was 2.4% in July, down from 2.5% in June, while the number of employed people was unchanged from a year earlier at 68.5 million. That combination of low unemployment, improving confidence and weaker real household spending suggests that the consumer side of the economy is not moving in a single direction.

The next Household Survey release, covering August, is scheduled for October 9. It will provide the next monthly test of whether July’s small seasonally adjusted rebound develops into a more durable recovery or whether the year-over-year decline in real spending continues.