Japan data signal solid economic recovery
tokyo — Japan’s core inflation accelerated in August, industrial output rose more than expected and demand for labour remained at its strongest in over 40 years in a further sign of solid momentum in the world’s third-largest economy.
The flurry of data should bolster optimism about the outlook for growth, though Prime Minister Shinzo Abe’s decision to call a snap election has raised some uncertainty over economic policy.
There was also some uneasiness about monetary policy after a summary of the Bank of Japan’s most recent meeting showed one board member wanted an expansion of stimulus as consumer prices remain distant from the central bank’s two per cent inflation target.
Nationwide core consumer price index, which includes oil products but excludes volatile fresh food prices, rose 0.7 per cent, matching a median market forecast. It was the eighth straight month of gains in the index, and followed a 0.5 per cent rise in July. “Prices are rising gradually. Exports are supporting output and domestic demand doesn’t look too bad,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“As long as Abe remains in power, we will see a continuation of his policies, but it all depends on the election.”
Indeed, demand for labour remains at the strongest level since 1974 with data showing the jobsapplicants ratio held steady at 1.52 in August.
Industrial output also rose a larger-than-expected 2.1 per cent in August from the previous month as manufacturers of construction equipment, autos, and electronic parts produced more goods.
Manufacturers surveyed by the government expect output to fall 1.9 per cent in September and then expand by 3.5 per cent in October.
Politics, however, added a layer of uncertainty over the outlook for growth, with inflation still well behind the BoJ’s target. —