The scale of the miss, a 6.4% month-on-month drop against an expected 3.1% decline, weakens the case for a September Bank of Japan hike by casting doubt on the strength of domestic demand even as real wages continue to rise.
Yen sentiment is likely to soften near term if markets read this as pushing the BOJ’s timeline out, particularly against a backdrop of already elevated global rate uncertainty
Japanese equities exposed to domestic consumption may see added pressure, while exporters could see relative support from any yen weakness. The data adds another data point for the BOJ to weigh alongside wage growth and inflation trends heading into its next policy decision, with the divergence between rising pay and falling spending complicating a clean