Japan Household Spending Cools as Current Account Shrinks Despite Trade Surplus

Japanese consumer spending lost momentum in June, with all-household outlays rising 1.3% from a year earlier, roughly half the market’s expected pace and down sharply from May’s 4.7% gain. On a monthly basis spending fell 5.2%, reversing a 4.6% increase the previous month and underscoring fragile domestic demand. External balances also softened. The current-account surplus narrowed to ¥1.35 trillion ($9 billion) in June, well below the ¥1.81 trillion consensus and less than half May’s ¥3.44 trillion. Even so, the trade component swung to a ¥469.6 billion surplus after a ¥522.3 billion deficit, suggesting the wider gap was driven by weaker income flows. The seasonally adjusted current account came in at ¥2.40 trillion versus a revised ¥2.82 trillion a month earlier. Credit growth showed a brighter tone: bank lending including trusts expanded 3.2% year on year in July, the fastest pace since February, while loans excluding trusts rose 3.5%. The mixed data complicate the Bank of Japan’s assessment of whether consumption can shoulder more of the recovery as it weighs the timing of further policy normalization.