Japan Macro Private Consumption Resilience

Mizuho argues that Japanese private consumption will withstand high oil prices due to government subsidies and a decoupling of consumer sentiment from actual spending. Real wage growth and resilient service spending support the case for a BOJ rate hike in June.

Key Takeaways

• 1.Japan's private consumption is expected to remain resilient despite higher crude oil prices triggered by geopolitical tensions in Iran.
• 2.Government subsidies for gasoline, electricity, and gas are significantly muting the inflationary impact on households.
• 3.The historical correlation between consumer sentiment and actual consumption has decoupled since 2022, suggesting sentiment drops may not lead to spending collapses.

Table of Contents

• (1) Government price controls limiting the impact of higher crude oil costs
• (2) Households likely to keep spending even as sentiment deteriorates?
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