Japan household spending rebounds in positive sign for economy

By Leika Kihara
Shoppers browse vegetables at a supermarket in Chiba, east of Tokyo February 26, 2014. REUTERS/Yuya Shino

By Leika Kihara

TOKYO (Reuters) - Japan's household spending rose 1.9 percent in January from a year earlier, government data showed on Friday, adding to recent positive signs for an economy enjoying its longest run of growth in 28 years.

But the increase, which followed a 0.1 percent drop in December, was driven mostly by higher costs for of necessities such as fuel and medical treatment as unusually cold weather hit households, the data showed.

The figure also takes into account changes the government made from January to the way it compiles the data, such as the nature of items included in the survey of households.

Household spending rose 2.7 percent in January versus a month ago.

Consumption has been a soft spot in an otherwise robust recovery, hampering efforts by the Bank of Japan to achieve its 2 percent inflation target as firms remain wary of raising prices for fear of scaring away cost-sensitive households.

Service-sector confidence worsened in February for a third straight month to a 10-month low, data showed on Thursday, further underscoring fragility of consumer spending.

Some analysts say household spending data tends to be more volatile and shows a weaker picture of consumption than retail sales figures, because it is compiled from a limited sample of households and skewed to an older generation who do not spend much.

At a two-day meeting ending later on Friday, the BOJ is widely expected to maintain its massive stimulus programme and projection that the economy is headed for a moderate expansion.

(Reporting by Leika Kihara; Editing by Eric Meijer)