TOKYO, June 6 (Reuters) - Japanese household spending unexpectedly fell in April, government data showed on Friday, as consumers tightened their purse strings in the face of higher prices.
Consumer spending fell 0.1% in April from a year earlier, according to the internal affairs ministry. That was worse than the median market forecast for 1.4% growth and March's 2.1% increase.
On a seasonally adjusted, month-on-month basis, spending declined 1.8%, versus an estimated 0.8% fall.
"Consumer spending appears not to be on track for recovery still," said Masato Koike, senior economist at Sompo Institute Plus.
Consumption and wage trends are among key factors the Bank of Japan is watching to gauge economic strength and decide how soon to raise interest rates.
Hefty pay hikes are seen as essential to counter sharp increases in the cost of living. Major Japanese firms on average agreed to more than 5% pay hikes during annual spring wage talks in March.
The monthly wage data released on Thursday showed real wages fell for a fourth consecutive month, eroded by stubborn inflation that has continued to outpace pay hikes, even though base salaries rose at the fastest pace in four months.
"It is positive that wages are rising, but prices are eating into those gains, and in April, the negative impact was still stronger," said Atsushi Takeda, chief economist at Itochu Research Institute.
On prices, Takeda said inflation probably peaked out in April as the yen gained strength and crude oil prices dropped.
Japanese policymakers and analysts are also concerned global trade tensions triggered by U.S. tariffs may weaken wage momentum and complicate the BOJ's efforts to normalise monetary policy.
"If corporate earnings are significantly squeezed (because of the tariffs), it will have a negative impact on winter bonuses and spring wage negotiations next year, which could lead to a stagnation in wage increases," said Sompo's Koike.
Reporting by Satoshi Sugiyama Editing by Chang-Ran Kim and Sam Holmes
Source: Reuters