[Japan] Real consumer spending in May 2025 expanded due to temporary factors; consumption remains flat but expectations for the future are hopeful | A clear explanation of important economic indicators in Japan and America | Manekuri, a media outlet providing investment information and financial assistance from Monex Securities.

Announcement on July 8, 2025 (Tuesday) at 14:00

Japan Economic Watchers Survey for June 2025

(Others: From the latest family income and expenditure survey, commercial activity statistics, consumption trend survey, and consumption activity index)

【1】Results: Some recovery can be seen, but consumption trends are varied.

[Figure 1] Recent Consumption-Related Statistics

• Items without a supplementary unit are index values, and the figures in parentheses represent the year-on-year percentage change. Source: Created by Monex Securities from the Ministry of Internal Affairs and Communications, Cabinet Office, Bank of Japan, and Ministry of Economy, Trade and Industry. In the household expenditure survey of May 2025, the real consumption expenditure of households with two or more workers increased by 6.1% compared to the same month the previous year, reaching 351,000 yen, marking the third consecutive month of year-on-year growth. Temporary expenditures such as automobile purchases have boosted the overall figure, expanding the positive margin. Real income has increased for the first time in five months, entering positive territory along with disposable income (income after deductions for taxes and social insurance, commonly known as take-home pay), and while fluctuating, income and consumption continue to trend together (Chart 2).

When looking at other consumption indicators, the Ministry of Economy, Trade and Industry's main assessment indicates that retail sales are experiencing a back-and-forth situation, showing signs of stagnation. Additionally, department stores (for April 2025) are continuing to trend negatively due to a decline in inbound demand, suggesting some weakness in certain areas. Consumer sentiment appears to be recovering; overall, it is not bad, but it still gives the impression that there is no strong momentum.

[Figure 2] Trends in Income and Consumption of Households with Two or More Workers (Year-on-Year Comparison, %) Source: Created by Monex Securities from the Ministry of Internal Affairs and Communications, all three indicators are on a real basis.

【2】Content and Highlights: Private final consumption GDP for the previous quarter is flat.

[Figure 3] Trends in Household Consumption Trend Index and Consumption Activity Index Source: Bank of Japan, created by Monex Securities, Inc. ※CTI Micro refers to households with two or more members. The Household Consumption Trend Index, also known as the CTI Micro, is an index that quantifies the "average consumption expenditure amount per household." In March, the CTI Micro for households with two or more people increased by 2.3% compared to the previous month (seasonally adjusted), confirming that consumption has expanded, although it is largely due to temporary factors as mentioned above.

On the other hand, the consumption activity index calculated by the Bank of Japan has been trending sideways for the past few months, showing no signs of expansion in consumption. While we need to wait for the next data, at this point, personal consumption in GDP for the previous quarter (April-June 2025) is expected to be flat, with a forecast of approximately 0% compared to the previous quarter.

【3】Thoughts: Expecting a consumption-driven economy amidst ongoing uncertainty

[Figure 4] Trends in Consumer Mindset Indicators (Points) Source: Created by Monex Securities from the Cabinet Office, shadows indicate a recession period. Consumer sentiment shows a tendency to recover, and whether this trend continues will be the key point. Additionally, the wage increase rate in the spring labor negotiations has slightly exceeded the previous year's results, and it is expected to gradually impact consumption. Currently, in the Japanese market, the tariff policies and negotiations by the U.S. administration are prolonged, making it unlikely for the manufacturing sector to see significant improvement or expansion in sentiment during this quarter (July-September 2025).

On the other hand, rice prices, which had been putting pressure on household consumption, have begun to decline. Given that the wage increase rate has surpassed 5% year-on-year, if real wages gradually converge positively, it is believed that the consumption-led domestic demand sector will support the economy. In fact, there are signs of strong figures in the existing store sales of major retailers. Although the peak of inbound demand may pose a headwind, the key point will be whether domestic demand expands instead.

Monex Securities Financial Intelligence Department Keita Yamaguchi