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Economy

Japan wages and household spending extend COVID-driven declines

Analysts see recovery; Suga faces challenges in reviving economy

Men wearing protective face masks are seen inside an office building amid the coronavirus outbreak in Tokyo on September 29.   © Reuters

TOKYO (Reuters) -- Japan's household spending fell for an 11th straight month in August and real wages marked half a year of declines, as consumers struggled to return to their pre-pandemic purchasing habits.

Analysts see the economy picking up from the slump caused by the coronavirus but weak spending and wage figures highlight the challenges new Prime Minister Yoshihide Suga faces as he works to revive the economy.

Household spending declined 6.9% in August from a year earlier, government data showed on Friday, matching a median forecast in a Reuters poll.

A year-on-year decline in the household spending in August would mark the 11th straight of falls, the longest period of contraction since a 15-month stretch to May 2017.

However, the pace of decline has slowed after hitting a record 16.2% in May, when people stayed at home to prevent the virus infection under the nationwide shutdown.

The government lifted the emergency measures in late May and business activity has gradually resumed.

Compared with the previous month, household spending rose 1.7% in August after a 6.5% decline in July.

"We expect the overall economy including consumer spending will pick up as the economic activity restarts," said Yusuke Shimoda, senior economist at Japan Research Institute.

"But people remained cautious about risks to get the virus infection and wages are expected to worsen further, so the pace of recovery in consumer spending will likely be limited."

Separate data on Friday showed the nation's inflation-adjusted real wages fell 1.4% in August from a year earlier, down for the sixth straight month, reflecting a big drop in overtime.

The economy tumbled deeper into recession in the June quarter as the coronavirus jolted global demand and analysts say it will take time for pre-pandemic levels of activity to return.

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