Japan’s consumption recovery depends on high-income households

The consumption recovery in Japan has been noticeably slower than in other advanced economies. The recent pick up in the pace of the recovery was mainly brought about by an increase in discretionary spending among high-income households, supported by accumulated savings and wealth effects.

What you will learn:

• Households in the low- and middle-income bracket have barely managed to maintain essential consumption in an environment of rising prices of necessities and stagnant wages.
• The fall in discretionary spending among the middle class is particularly significant because their real income has fallen quickly, with little support from savings and assets.
• Although our analysis suggests that there is still unfulfilled pent-up demand for discretionary spending among the rich, it will gradually lose momentum by mid-2023. We don’t expect consumption to regain its 2019 level until 2024.