Interest rate decision in Japan is getting harder: Wage increase failed to convince consumers to spend

Japan’s expected December rate hike is being tested by weak domestic demand after real wages rose 2.2% year on year in September while household spending fell 6.8%, the sharpest consumption drop in more than five years. The divergence raises doubts about the strength of Japan’s economic recovery and complicates the Bank of Japan’s path toward higher interest rates. Investors will watch upcoming wage, consumption and inflation data, along with BoJ communications, for signals on whether a December move remains likely.