Japan's real consumption expenditure for households of two or more people fell 3.6% year on year in July to ¥301,245 per household, an eighth consecutive monthly decline and the steepest drop since January 2024, data from the Ministry of Internal Affairs and Communications showed. The result deepened from June's 3.3% fall and far exceeded the market consensus for a roughly 1.6% decline. Seasonally adjusted real spending rose 0.5% month on month, the third increase in four months, reversing a 6.4% slide in June but missing a forecast for a 2.6% jump. Big-ticket items drove the annual weakness: transportation and communication fell 8.5% in real terms and subtracted 1.29 percentage points, led by automobile purchases, while housing dropped 16.4% and subtracted 1.08 points on equipment repairs. Culture and recreation rose 4.8% on lodging strength, furniture and household goods edged up 0.7%, and dining out and alcohol also exceeded year-earlier levels, underscoring selective demand for services and durables even as food spending fell 1.3%. Among working households, real income fell 3.8% to ¥689,476—the first decline in eight months—as temporary income and bonuses plunged 11.5% in real terms while the household head's regular pay was flat; disposable income fell 3.1% to ¥554,381. Their average propensity to consume eased to 58.2% year on year but rose to 63.0% on a seasonally adjusted basis. Prior reporting also showed worker-household consumption expenditure down 6.8% to ¥322,866. A ministry official said consumers lifted entertainment and household-goods outlays while cutting food and transportation. Masato Koike of Sompo Institute Plus said large spring wage hikes have not prevented intensifying pressure as higher prices become more pronounced. The Bank of Japan will weigh consumer spending among other factors when considering a rate rise as early as this month, though the July figures themselves are unlikely to weigh heavily. Separately, Tokyo's annual core inflation accelerated in August for a third straight month. Household consumption accounts for more than half of Japan's economy.