Household spending in Japan dropped sharply in July, heightening concerns that Prime Minister Shinzo Abe's decision to raise taxes by some $80 billion is taking a greater-than-expected toll on the economy.

Consumer spending fell an inflation-adjusted 5.9% from a year earlier in July, following a record drop in the second quarter, according to government data released Friday. Falling consumption is reverberating across the economy, leaving auto makers saddled with more unsold vehicles and crimping industrial production.

...