Japan’s economic recovery gained momentum last month as manufacturing accelerated and consumer prices rose for a second straight month, despite weaker household spending and retail sales.
The data released yesterday showed the consumer price index (CPI) rose 0.7 percent last month from a year earlier, for the second straight month of gains. That suggests efforts to break free of years of demand-dampening deflation are progressing. The CPI rose 0.2 percent in June.
However, the core index, which excludes food and energy prices, fell 0.1 percent.
The Ministry of Economy, Trade and Industry said industrial output rose 1.6 percent from a year earlier and 3.2 percent from the month before, in a sign the recovery is taking hold. It forecasts further expansion this month and next month.
“Income and other data show quite positive signs of recovery,” RBS Japan Securities economist Junko Nishioka said.
The government has boosted spending and pushed for ultra-loose monetary policies aimed at generating inflation. It says that will help perk up demand and, in response, investment and employment, ending years of stagnation.
However, economists say that without matching increases in wages, rising prices and planned tax hikes could actually weaken the consumer demand that accounts for the bulk of business activity, undermining any economic rebound.
Average household spending fell 1.4 percent last month from a year earlier, despite slight improvements in income and the jobless rate, which fell to 3.8 percent from 3.9 percent the month before.
Retail sales fell 0.3 percent last month from a year earlier for the first decline in three months. Sales of clothing and other items sagged, while food sales rose.
The government attributed at least some of the limpness of demand to hot weather.
However, with prices rising, many consumers already are feeling a pinch, Capital Economics said in a commentary.
“Perhaps the biggest threat to consumer spending is the rise in inflation,” it said, adding that bustling sales earlier in the summer were probably helped by bonus payments and overtime in June.
“Households are probably well aware that once the summer bonus season is over, wages will likely continue shrinking, depressing their purchasing power,” it said.
Still, the overall positive tone of last month’s data will likely bolster support for pushing ahead with a sales tax planned for April 1 next year. A decision on that plan is due within the next month.
The anticipated 3 percentage point increase in the nationwide sales tax to 8 percent will undoubtedly be a blow, Ishioka said, but she expects it to be short-lived given the currently favorable trends.
“People’s sentiment is improving. I think the fundamental conditions are OK,” she said.
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading