Japan July household spending rises, weaker than expected

TOKYO (Reuters) - Japanese household spending rose less than expected in July, government data showed on Friday, as consumers remained wary of loosening their purse strings in the face of higher prices.

Consumer spending edged up 0.1% in July year-on-year, compared with the median market forecast for 1.2% growth. On a seasonally adjusted, month-on-month basis, spending decreased 1.7% versus an estimated 0.2% drop.

Data a day earlier showed Japan's inflation-adjusted wages grew for the second straight month in July, primarily thanks to a bump in summertime bonuses. Base pay, or regular pay, marked the fastest pace of increase in nearly 32 years, reflecting results from this spring's labour-management wage talks.

But a government official said the big test would be whether real wages continue rising in August and beyond, without the seasonal factor of summer bonuses.

Along with solid wages and durable inflation, robust consumption is among the factors the Bank of Japan says are key to its decision to raise interest rates further.

The BOJ ditched negative interest rates in March and raised short-term rates to 0.25% in July on the view the economy was making progress toward durably achieving its 2% inflation target.

The Japanese government last month upgraded its economic assessment for the first time in more than a year on signs of improving personal spending, which accounts for more than half of Japan's economy.

(Reporting by Satoshi Sugiyama; Editing by Himani Sarkar and Lincoln Feast.)