Japan posts lacklustre household spending, inflation

GMT 03:20 2015 Friday ,29 May

Arab Today, arab today Japan posts lacklustre household spending, inflation

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Tokyo - AFP

Japanese household spending unexpectedly fell an April while inflation and factory output were also lacklustre, a string of official data showed Friday, aggravating concerns about the world's third-largest economy.

The figures come as some economists warn that Japan could see a weak second quarter, following a better-than-expected 0.6 percent expansion -- or a 2.4 percent annualised rate -- during the first three months of the year.

Household spending remains stubbornly weak as the government and Bank of Japan struggle to boost prices in a bid to slay deflation for good and kickstart the long-lumbering economy.

Despite modest wage rises at big firms and a tight labour market, efforts to convince people to splash out on consumer goods has been a struggle after Japan raised sales taxes last year to help pay down a huge national debt -- hammering consumer spending and pushing the economy into a brief recession.

On Friday, the internal affairs ministry said household spending -- a broad measure of private consumption -- fell 1.3 percent from a year ago, the 13th consecutive month fall.

The drop was a surprise given market expectations that spending would turn up for the first time since Tokyo raised the sales levy in April 2014.

Separate data from the ministry showed core inflation, excluding volatile fresh food prices, hit 0.3 percent on-year, beating market expectations for a 0.2 percent rise but still way off the Bank of Japan's 2.0 percent target. Excluding the lingering effect of last year's tax rise, inflation was around zero.

Analysts say central bank policymakers will almost certainly be forced to expand the BoJ's massive monetary easing scheme to jack up prices and counter a downturn in the economy.

Sustained inflation is a cornerstone of Prime Minister Shinzo Abe's drive to reverses years of falling or stagnant prices.

Separately, Japan's factory output turned up 1.0 percent on-month in April, reversing a drop in the previous month, while the unemployment rate edged lower to an 18-year low of 3.3 percent last month.

"Despite the softness of private consumption, the labour market continues to tighten," Marcel Thieliant from Capital Economics said in a commentary.

"Unfortunately ... a tighter labour market is no guarantee for stronger price pressure.

"The rise in industrial production in April did not reverse the sharp falls in prior months, leaving output set for the first contraction since Q3 2014," he added.

The latest data for April comes a week after the BoJ wrapped up its latest meeting where it held steady on expanding its annual 80 trillion yen ($646 billion) asset-buying plan as its chief Haruhiko Kuroda said the economy was on the mend.

However, Kuroda has been forced to push back a timeline for hitting the inflation target, although he insists that healthy price rises are around the corner, despite doubts among a growing number of economists.

"Inflation will remain subdued for a while -- the BoJ will have to expand policy again," Tomo Kinoshita, an economist at Nomura, told Bloomberg News.

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