The economy shrank by an annual rate of 0.6% in the first quarter of 2018 as consumers kept their purse strings tight despite signs that paychecks are finally beginning to rise after decades of flat wages. Cabinet office data released Friday confirmed that a two-year run of economic growth had at least temporarily run aground, with household spending contracting by 0.1% in the first quarter of 2018, a downward revision from preliminary data which showed no change, Jijipress reported. “The main factor behind the contracting consumption is due to surging prices earlier in the year, which appears to be only a temporary headwind,” said Marcel Thieliant, a senior Japan economist with Capital Economics. Harsh winter weather led to a spike in fresh food prices in January, contributing to weaker purchasing power for many households. But this factor appears to be fading through the second quarter of the year and fresh food prices declined during the February-April period. Nominal wages were up 0.8% in April, rising for the ninth straight month, according to data released by the labor ministry Wednesday. However, when accounting for inflation, real wages saw no change from the previous month.
