–February Household Spending Seen Sluggish amid Falling Real Wages; March Producer Inflation to Tick Up on Higher Energy Costs

(MaceNews) – Here are the key Japanese events for the coming week in the new fiscal year that began on April 1.

Bank of Japan branch managers will provide their latest assessments of regional economies including how the Mideast conflict is affecting households and firms, following the release last week of the bank’s Tankan business survey for the March quarter. The Iran war that broke out in late February appears to have had only a limited immediate impact on many sectors in the Tankan data.

The Tankan showed a slight improvement in sentiment among large manufacturers, led by non-ferrous metal producers, production machine makers and the auto industry, indicating that firms are generally weathering the drag from stiff U.S. tariffs, but major refineries turned sharply pessimistic in the face of a spike in global crude oil prices.

Higher energy and labor costs also mildly dampened confidence among cost-sensitive sectors among non-manufacturers, namely transport firms/postal services as well as providers of electricity and natural gas. Weaker tones in those sectors offset upbeat views among large hotels/restaurants and leasing firms, leading to a flat March reading for non-manufacturer sentiment.

BOJ board members will digest these pieces of data and other anecdotal evidence when they update their medium-term inflation and growth forecasts as well as risk analysis in its quarterly Outlook Report to be issued after the next policy meeting on April 27-28.

The board is expected to predict that in the second half of its new projection period (fiscal 2026 through fiscal 2028), underlying CPI inflation and the rate of increase in the core CPI (excluding fresh food) should increase gradually and will be “at a level that is generally consistent with the (2%) price stability target.”

The focus is on whether board members will place more importance to supporting growth in the face of rising energy costs or seek to prevent underlying inflation from surging. The board could decide to raise rates at the April meeting but Governor Kazuo Ueda told reporters after March meeting that he needed more time to assess the impact of heightened geopolitical risks.

At its March 18-19 meeting, the nine-member board decided in an 8 to 1 vote to leave the target for the overnight interest at 0.75% following no change in policy by an 8 to 1 vote in January. In December, the bank raised the key rate by 25 basis points (0.25 percentage point) to a 30-year high in a unanimous vote after standing pat at the previous five meetings.

On the data front, household spending is expected remain sluggish in February amid falling real wages. Producer inflation is forecast to pick up in March on higher energy prices and the weak yen that is keeping imports costly after slowing to a nearly two-year low in February thanks to easing farm produce prices.

Monday, April 6

Bank of Japan branch managers gather at the bank’s head office for a quarterly meeting at which they discuss their regions’ economic and financial conditions. In their last assessment released on Jan. 8, all nine regions reported that their respective economies had been either “recovering moderately,” “picking up” or “picking up moderately, although some weakness had been seen in part.”

Tuesday, April 7

0830 JST 0830 JST (2330 GMT/1930 EDT Monday, April 6) The Ministry of Internal Affairs and Communications releases February average household spending.

Japan’s real average household spending is expected to dip 0.8% on year in February after having unexpectedly posted a second straight drop in January (-1.0%). Consumers remain cautious amid falling real wages and there is also a widespread move to switch to more affordable mobile communications plans.

Retail sales posted their first year-on-year drop in two months, down a slight 0.2% in February, in payback for a high level of auto sales in February 2025 and a 10th straight drop in fuel sales. The impact of the Mideast conflict has been largely limited as the government continues to limit energy price hikes with subsidies to refineries and electric power suppliers.

Department store sales rose 1.6% on year in February after rebounding 2.3% in January, led by demand for spring clothing in milder weather. Sales to visitors from overseas marked their fourth straight drop as Chinese tourists continued boycotting Japan over bilateral diplomatic rows, although spending by visitors from Taiwan, Thailand and Malaysia picked up some of the slack.

On the month, real average expenditures by households with two or more people is forecast to mark their first gain in three months, up a solid 2.3% after slumping 2.5% in January.

Tuesday, April 7

1400 JST (0500 GMT/0100 EDT Tuesday, April 7) The Bank of Japan releases the February supply-side consumption activity index.

The index rebound a seasonally adjusted 0.4% on the month in January after slipping 0.2% in December and rising 0.7% in November. It rose 0.5% on the October-December period after being nearly flat (-0.0%) in the previous quarter.

Figures exclude inbound tourism consumption but include outbound tourism spending.

Wednesday, April 8

0830 JST 0830 JST (2330 GMT/1930 EDT Tuesday, April 7) The Ministry of Health, Labour and Welfare releases preliminary February average wages.

Total average cash earnings per regular employee in Japan rose a nominal 3.0% on year in January after rising 2.4% in December, led by a solid gain in base wages and a jump in both overtime and winter bonuses.

But real average wages remain weak, rising 1.4% for the first increase in 13 months after falling 0.1% in December and slumping 1.6% in November. In 2025, real wages marked their fourth consecutive annual drop, down 1.3%.

Wednesday, April 8

1400 JST (0500 GMT/0100 EDT Tuesday, April 7) The Cabinet Office releases the March Economy Watchers’ Survey conducted from March 25 until March 31. The March report is expected to show flat to softer readings amid higher energy and commodities prices triggered by the Mideast conflict. The February survey results were only partially affected by the Iran war that broke out on Feb. 28.

The Watchers’ sentiment index indicates the direction of Japan’s current economic climate rose to a nearly two-year high of a seasonally adjusted 48.9 in February from 47.6 in January, ending three months of decline. The index has stayed under the key 50 line for nearly two years. It was last above the neutral line in March 2024 (50.1).

The Watchers’ outlook index, which projects sentiment in two to three months, slipped to 50.0 in February after rising to 50.1 in January from 49.5 in December. The index surged to 52.2 in October from 48.4 in September, returning to positive territory for the first time since August 2024 (50.2).

Thursday, April 9

1400 JST (0500 GMT/0100 EDT Wednesday, April 8) The Cabinet Office releases the March Consumer Confidence Survey.

The confidence index jumped a seasonally adjusted 2.1 percentage points on the month to 40.9 in February after edging up 0.7 point to 37.9 in January to hit the highest level since April 2024 (38.2) and dipping 0.3 point in December for the first drop in five months. The increase was led by more upbeat views on overall livelihood (+2.9 point), income growth (+0.5), employment (+1.6) and willingness to buy durable goods (+3.5).

Last month, the Cabinet Office upgraded its assessment to say that consumer confidence was “showing signs of improvement” vs. “picking up.” It noted that the index’s three-month moving average rose 0.9 point to post the ninth straight rise.

Friday, April 10

0830 JST (2350 GMT/1930 EDT Thursday, April 9) The Bank of Japan releases the March corporate goods price index.

Mace News median: CGPI +2.2% y/y (range: +1.9% to +3.8%) vs. Feb +2.0%; +0.5% m/m (range: +0.2% to +2.1%) vs. Feb -0.1%

Producer inflation in Japan is expected to accelerate slightly to 2.2% in March from 2.0% in February as rising tensions in the Middle East pushed oil product prices higher following three consecutive months of deceleration through February on easing farm produce prices.

The projected 2.2% increase in the corporate goods price index would be still lower than 2.3% seen in January. The recent low figures are the slowest since 1.2% in April 2024. Producer prices have eased gradually in recent months after having hit a recent peak of 4.3% in each of February and March 2025 (the highest since 4.5% in June 2023).

On the month, the CGPI is forecast to post a seventh straight increase, up 0.5% following a 0.1% gain the previous month.