TOKYO (Reuters) – Japanese household spending unexpectedly fell in May, government data showed on Friday, as higher prices continued to squeeze consumers’ purchasing power, further threatening the fragile economy.

Consumer spending contracted 1.8% in May from a year earlier, far below the median market forecast for a 0.1% uptick.

On a seasonally adjusted, month-on-month basis, spending decreased 0.3% versus an estimated 0.5% rise.

Sluggish private consumption is a source of concern for policymakers striving to achieve sustained economic growth underpinned by solid wages and durable inflation, which are prerequisites for normalising monetary policy.

The Japanese economy shrank more than initially reported in the January-March quarter, the government said earlier this week, in a rare, unscheduled revision to gross domestic product (GDP) data.

Economists, though, expect GDP to rebound this quarter thanks to higher wages and capital expenditures driving up domestic demand. A survey conducted by Japan’s largest trade union group showed workers’ monthly pay will rise 5.10% on average this fiscal year, the biggest hike in three decades. To view the data on the website of the Ministry of Internal Affairs and Communications, click here:

(Reporting by Satoshi Sugiyama; Editing by Chang-Ran Kim)

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