By Daniel Leussink

TOKYO, Reuters – Japan’s April household spending dropped faster than anticipated due to the sharp fall in the yen and rising commodity prices. This pushed up retail cost and impacted consumer confidence. It also increased economic pressures.

The spending improved over the past month due to households showing an increase in their appetites for eating out. However, the monthly growth was less than anticipated, which suggests that the impact of the pandemic is still a problem.

As a sign that the economy is in trouble, real wages dropped at an unprecedented pace over four months, in April. Prices also saw their largest jump in seven years. This weighed on households’ purchasing power.

The government data revealed that household spending fell 1.7% from a year ago in April, faster than the 0.8% market prediction in a Reuters poll. This was due to lower consumption of vegetables and cars.

Monthly figures for January showed 1.0% growth, which is also less than expected 1.3% increase.

Takeshi Minami is chief economist of Norinchukin Research Institute. He stated, “Higher food and energy prices are having an important impact and suppressing consumer consumption.” While a spending rebound is still possible, it’s slowing down.

These data are alarming for policymakers who worry about how households will be hit by rising costs for everyday necessities and weakening yen. This is causing consumers to hesitate to spend and pushing up import prices.

Haruhikokuroda, Bank of Japan Governor said that prices were being accepted by households.

Early Tuesday saw the Japanese yen trade at around 132.20 yen for every dollar, a two-decade record.

An official from the government said that price hikes had not affected food expenditures. He stated that the trend was in decline since last spring, which is indicative of less demand for healthy eating.

However, it was said that consumer sentiment is extremely concerning.

Data from the government on Tuesday showed that inflation-adjusted wages fell 1.2% in April. This was their slowest pace in 4 months. A 3.0% increase in consumer prices outpaced an increase in nominal wages.

“The problem lies in the structure. Minami said that Minami felt the need to address the structural problem of wages and price increases not being in sync.

Japan’s economy should rebound after its January-March contraction. But it will be under increased pressure due to high energy and raw material prices, as well the weakening of the yen.