Sat, Jun 01, 2013 - Page 15 News List

Japan deflation remains: data

AIMING HIGH:Japanese Prime Minister Shinzo Abe’s policies aim to target deflation and hit 2 percent inflation within two years, but some experts have cast doubt on this target


Japanese factories churned out a better-than-expected performance in April, but the upbeat data yesterday was tempered as the export powerhouse remained mired in deflation.

Economists were combing through a string of data — including factory output and inflation — for signs an economy-boosting plan by Japanese Prime Minister Shinzo Abe and his hand-picked team at the Bank of Japan was taking hold.

The policy prescription of big government spending and aggressive central bank easing to stoke the world’s third-largest economy, dubbed “Abenomics,” has helped push the yen into a steep decline which benefits Japan’s exporters.

April factory output rose 1.7 percent over a month earlier, while April jobless rate was flat at a multi-year low of 4.1 percent, the official data showed.

A manufacturer survey yesterday showed Japanese producers remain cautious, expecting last month’s factory output to be flat before slipping 1.4 percent this month.

Household spending was also weaker than expected while consumer prices fell 0.4 percent on-year in April, underscoring the tough task in reversing years of deflation that has crimped private spending and business investment.

A small 0.1 percent increase in Tokyo-area prices for last month, the first in about four years, offered some hope amid reports that luxury brands including Chanel and Germany’s Montblanc were set to raise their local prices by about 10 percent in response to the yen’s drop against the US dollar.

Apple was reportedly boosting the price of iPads sold in Japan by as much as 20 percent.

“There are signs that price drops are coming to a halt,” said Masahiko Hashimoto, an economist at Daiwa Institute of Research.

However, “it is still difficult to say this is thanks to ‘Abenomics’ as it usually takes time for a pick up in the economy to be reflected in prices.”

Deflation is a key target of Abe’s measures, as the Bank of Japan works to hit 2 percent inflation within two years, but some observers — including several Bank of Japan board members — have cast doubt on the ambitious target.

The bank’s huge monetary easing measures have driven down the yen, which traded around ¥101 against the US dollar yesterday, about 25 percent lower than late last year.

Meanwhile, the IMF yesterday kept its 1.6 percent growth forecast for Japan’s economy this year, giving Abe’s plan a thumbs up.

The economy expanded again in the first quarter, confirming its exit from recession.

However, the IMF also warned of “considerable downside risks” if Japan does not chop its massive national debt — the worst among industrialized nations at more than twice the size of the economy.

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