TOKYO: Japan’s household spending grew less than expected in July as a resurgence in Covid-19 cases hindered consumer activity, throwing broader economic recovery prospects into doubt.

       The world’s third-largest economy is struggling to shake off the impact of the coronavirus pandemic, which forced the government to impose new state of emergency restrictions that now cover about 80% of the population.Household spending rose 0.7% year-on-year in July, after a revised 4.3% fall in June, government data showed yesterday. That was weaker than a median market forecast for a 2.9% gain in a Reuters poll.

       The modest rise in July was partly due to a sharp contraction in the same month last year, when household spending slumped 7.6% year-on-year as consumers delayed spending on things such as travel and overnight stays due to the health crisis.

       The month-on-month figures showed a 0.9% contraction in July, the third straight month of decline, the internal affairs ministry data showed, dashing expectations for 1.1% growth.

       “Face-to-face leisure services stayed weaker with worsening Covid-19 infections and the reinstatement of state of emergency curbs in Tokyo,” said Masato Koike, an economist at Dai-ichi Life Research Institute.

       “Going forward, the tug-of-war between worsening infections and vaccination will keep services spending volatile.”

       Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute, said continued infections could have dragged private consumption even lower in August.

       Spending on food, leisure and transportation rose year-on-year while spending on consumer electronics, utility payments and face masks fell.

       Separate data yesterday showed inflation-adjusted real wages in July rose 0.7% from the same month a year earlier, though the gain was also because of a flattered comparison with last year’s steep pandemic-driven drop.

       But the data was unlikely to dispel worries that Japan’s economy is at risk of slowing down in the third quarter, as explosive growth in Covid-19 cases at home and in other parts of Asia weighs on consumer and corporate activity.Revised gross domestic product (GDP) data today is expected to show the economy grew faster than initially reported in the second quarter, helped by stronger business spending.

       Meanwhile, Japan’s former foreign minister Fumio Kishida, a strong contender to become next prime minister, has called for a package of more than 30 trillion yen (US$273bil or RM1.13 trillion) to cushion the blow from the coronavirus pandemic, a magazine reported.

       Suga’s shock Friday announcement he was stepping down has thrown a ruling Liberal Democratic Party leadership race set for Sept 29 wide open, with an array of candidates considering running.

       Kishida, 64, is the only candidate to formally announce his candidacy for the leadership so far. Kishida told Diamond magazine that if he were to become prime minister, he would have the Bank of Japan (BoJ) maintain its 2% inflation target and massive stimulus programme.

       “We can’t touch it for the time being. Removing the goal could send the wrong message to markets,” Kishida said on the BoJ’s price target, which critics say is unrealistic for an economy long suffering from near-zero inflation. We must support the economy with large-scale monetary easing and fiscal stimulus to protect people’s lives from the pandemic,” he was quoted as saying in an interview that ran on Monday evening.

       The remarks came after Kishida told a news conference last Friday that the government must compile a spending package worth “several tens of trillions yen,” without giving a specific number. — Reuters