Ja­pan in­fla­tion tepid, spend­ing de­creases in June

The China Post - - WORLD BUSINESS -

Ja­panese in­fla­tion was tepid last month while house­hold spend­ing suf­fered a sur­prise drop, of­fi­cial data showed Fri­day, fan­ning spec­u­la­tion the cen­tral bank would un­leash a fresh round of stim­u­lus.

Core in­fla­tion, ex­clud­ing volatile fresh food prices, edged up 0.1 per­cent from a year ago, the gov­ern­ment said, while ex­clud­ing food and energy, prices rose 0.6 per­cent — both well short of the Bank of Ja­pan’s 2.0 per­cent tar­get.

Lower fuel prices and other energy costs helped curb in­fla­tion, the in­ter­nal af­fairs min­istry data said.

Sep­a­rately, the min­istry said house­hold spend­ing fell 2.0 per­cent in June against mar­ket ex­pec­ta­tions for another rise af­ter a 4.8 per­cent in­crease in May.

The May fig­ure was the first monthly rise since Ja­pan hiked sales taxes in April last year to help pay down its huge na­tional debt.

The sales levy hike, Ja­pan’s first in 17 years, slammed the brakes on con­sumer spend­ing and briefly pushed the econ­omy into re­ces­sion.

Growth re­turned in the last three months of 2014 and the econ­omy ex­panded 1.0 per­cent in the first quar­ter of this year.

On Thurs­day, more up­beat fig­ures showed Ja­pan’s fac­tory out­put turned pos­i­tive in June, re­vers­ing a de­cline from the pre­vi­ous month.

But econ­o­mists have warned that the April- June GDP fig­ures could still be weak, and there is grow­ing spec­u­la­tion that the Bank of Ja­pan ( BOJ) will al­most cer­tainly be forced to ex­pand its al­ready huge mon­e­tary eas­ing scheme to jack up prices and stoke growth.

“The Bank is pin­ning its hopes on a strong re­bound in de­mand, which would cre­ate ca­pac­ity short­ages and stoke price pres­sures,” said Mar­cel Thieliant from Cap­i­tal Eco­nom­ics.

“Un­for­tu­nately, to­day’s data on con­sumer spend­ing un­der­line that these hopes are un­likely to ma­te­ri­al­ize,” he said in a com­men­tary.

Since tak­ing of­fice in late 2012, Prime Min­is­ter Shinzo Abe launched a pro-spend­ing pol­icy blitz that also calls for eco­nomic re­forms and mas­sive cen­tral bank stim­u­lus.

The eas­ing pro­gram helped send the yen tum­bling, which is pos­i­tive for Ja­panese ex­ports but pushes up im­port costs, trans­lat­ing in higher re­tail prices.

But Tokyo’s war on de­fla­tion has yet to be won and there is a “strong chance” prices will turn neg­a­tive from July, warned SMBC Nikko Se­cu­ri­ties.

Yasunari Ueno, chief mar­ket economist at Mizuho Se­cu­ri­ties, added: “I can’t see when the BoJ will be able reach the 2.0 per­cent in­fla­tion tar­get at all.

“It ap­pears to be a mat­ter of time be­fore the BOJ adds mon­e­tary stim­u­lus,” he told Bloomberg News.

The la­bor mar­ket re­mained tight, how­ever, with the un­em­ploy­ment rate edg­ing up slight to 3.4 per­cent from an 18-year low of 3.3 per­cent in May.

A sep­a­rate sur­vey from the la­bor min­istry showed the ra­tio of job of­fers to job seek­ers re­mained at a 23-year high of 1.19, mean­ing there were 119 of­fers for ev­ery 100 ap­pli­cants.

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