Japan's economy sends mixed signals
Japanese data on Friday painted a mixed picture of the economy with stubborn deflationary pressures lingering despite a tightening labour market and rising consumer spending.
By Agencies |
TOKYO: Japanese data on Friday painted a mixed picture of the economy with stubborn deflationary pressures lingering despite a tightening labour market and rising consumer spending.
Japan's core consumer prices dipped 0.1 per cent in May from a year earlier, declining for a fourth straight month and at the same pace as in April, the government said.
The core consumer price index (CPI) for Tokyo alone in June -- seen as a leading indicator for national price trends - was also down 0.1 per cent, dampening hopes of a near-term pick-up in the country-wide indicator.
"I think CPI will remain negative into June. The price pressures remain fairly limited right now," said Hiromichi Shirakawa, chief economist for Japan at Credit Suisse.
Renewed concerns over deflation have created a headache for the central bank, which last July raised interest rates for the first time in almost six years, followed by another quarter-point hike to 0.5 per cent in February.
But Mamoru Yamazaki, chief economist for Japan at RBS Securities, said if next week's Tankan or central bank survey of business confidence shows firms are upgrading their capital spending plans, then the BoJ could hike rates in August.
"There is no clear sign of sustained positive growth in the CPI," said Yamazaki.
"However, my sense is that conditions for the CPI are gradually changing. For example, at the wholesale level, prices are gradually picking up," he said.
After apparently exiting deflation last year, Japan has seen fresh drops in consumer prices since February, when they fell for the first time in 10 months as world oil prices cooled.
"As a whole, there is no change in economic circumstances. We still can't say that we are completely getting out of deflation," Economic and Fiscal Policy Minister Hiroko Ota told reporters Friday.
On a more positive note, Japan's unemployment total declined by 190,000 in May from a year earlier to 2.85 million, a separate official report showed.
The jobless rate held steady in May at a nine-year low of 3.8 per cent, slightly better than market expectations for a rise to 3.9 per cent.
The ratio of job offers to job seekers rose from 1.05 in April to 1.06 in May, meaning 106 jobs were available for every 100 job seekers.
Japan's labour market has been tightening as the economy recovers from its long slump and companies compete to hire skilled young graduates.
"Tightening supply-demand conditions in the labour market are a potential positive for wages and consumption," said Yamazaki at RBS Securities.
So far, however, firms have been reluctant to share more of their fast-growing profits with workers, resulting in sluggish wage rises that have meant the recovery in consumer spending has lagged behind the wider revival.
The government said Japan's average monthly household spending gained 0.4 percent in May compared with a year earlier to 293,231 yen ($2,382).
The increase was smaller than the 0.6 per cent gain economists had forecast and followed a 1.1 per cent rise in April.
The report suggested "consumption is growing moderately," said Shirakawa at Credit Suisse. "I tend to think the June consumption may be better than May."
The average monthly income of salaried households came to 431,013 yen, up 1.0 per cent, the government said.
The household spending data is one of the key indicators on personal consumption, which accounts for about 55 per cent of Japan's gross domestic product.
Japan's core consumer prices dipped 0.1 per cent in May from a year earlier, declining for a fourth straight month and at the same pace as in April, the government said.
The core consumer price index (CPI) for Tokyo alone in June -- seen as a leading indicator for national price trends - was also down 0.1 per cent, dampening hopes of a near-term pick-up in the country-wide indicator.
"I think CPI will remain negative into June. The price pressures remain fairly limited right now," said Hiromichi Shirakawa, chief economist for Japan at Credit Suisse.
Renewed concerns over deflation have created a headache for the central bank, which last July raised interest rates for the first time in almost six years, followed by another quarter-point hike to 0.5 per cent in February.
But Mamoru Yamazaki, chief economist for Japan at RBS Securities, said if next week's Tankan or central bank survey of business confidence shows firms are upgrading their capital spending plans, then the BoJ could hike rates in August.
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"There is no clear sign of sustained positive growth in the CPI," said Yamazaki.
"However, my sense is that conditions for the CPI are gradually changing. For example, at the wholesale level, prices are gradually picking up," he said.
After apparently exiting deflation last year, Japan has seen fresh drops in consumer prices since February, when they fell for the first time in 10 months as world oil prices cooled.
"As a whole, there is no change in economic circumstances. We still can't say that we are completely getting out of deflation," Economic and Fiscal Policy Minister Hiroko Ota told reporters Friday.
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On a more positive note, Japan's unemployment total declined by 190,000 in May from a year earlier to 2.85 million, a separate official report showed.
The jobless rate held steady in May at a nine-year low of 3.8 per cent, slightly better than market expectations for a rise to 3.9 per cent.
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The ratio of job offers to job seekers rose from 1.05 in April to 1.06 in May, meaning 106 jobs were available for every 100 job seekers.
Japan's labour market has been tightening as the economy recovers from its long slump and companies compete to hire skilled young graduates.
"Tightening supply-demand conditions in the labour market are a potential positive for wages and consumption," said Yamazaki at RBS Securities.
So far, however, firms have been reluctant to share more of their fast-growing profits with workers, resulting in sluggish wage rises that have meant the recovery in consumer spending has lagged behind the wider revival.
The government said Japan's average monthly household spending gained 0.4 percent in May compared with a year earlier to 293,231 yen ($2,382).
The increase was smaller than the 0.6 per cent gain economists had forecast and followed a 1.1 per cent rise in April.
The report suggested "consumption is growing moderately," said Shirakawa at Credit Suisse. "I tend to think the June consumption may be better than May."
The average monthly income of salaried households came to 431,013 yen, up 1.0 per cent, the government said.
The household spending data is one of the key indicators on personal consumption, which accounts for about 55 per cent of Japan's gross domestic product.
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