Sat, Dec 27, 2014 page15

• Japan output falls as inflation slows

  ECONOMIC SLUMP: Flat retail sales and lackluster domestic demand could prompt the Bank of Japan to unveil new stimulus measures next year, analysts said

  • Bloomberg
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  Japan’s inflation slowed for a fourth month last month, and industrial production and retail sales unexpectedly dropped, pointing to further weakness in an economy Japanese Prime Minister Shinzo Abe is trying to revive from recession.

  Output fell 0.6 percent last month from a month earlier, Japan’s Ministry of Economy, Trade and Industry said yesterday, against a median estimate of a 0.8 percent increase in a Bloomberg News survey of economists.

  Retail sales slid 0.3 percent, while consumer prices excluding fresh food rose 2.7 percent from a year earlier.

  

  Employees of a department store in Tokyo yesterday place products into “lucky bags” for sale on Jan. 1, when most major department stores resume their business after the new year holidays.

  Photo: AFP

  EXPORTS

  With little sign of a rebound in domestic demand, the world’s third-largest economy may have to rely on exports to avert a third-straight quarterly contraction in the final three months of the year.

  Yesterday’s reports add pressure on Abe, whose government is to unveil today a stimulus package, and who pledged growth-inducing structural changes after winning reelection this month.

  “Companies have to see a recovery in domestic consumption before boosting production,” said Minoru Nogimori, an economist at Nomura Holdings Inc, adding that any rebound in the economy in the fourth quarter “will be far from strong.”

  With oil prices weighing on inflation, the Bank of Japan (BOJ) is likely to boost stimulus again, probably around October, he said.

  Stripped of the effect of April’s sales-tax increase, core consumer prices — the BOJ’s key measure — rose 0.7 percent, moving further away from the bank’s 2 percent goal.

  Tumbling oil prices could push Japan’s inflation as low as 0.5 percent by the middle of next year, according to economists at NLI Research Institute and Dai-ichi Life Research Institute.

  Energy prices dropped 1.2 percent from a month earlier, according to yesterday’s data. The price of Dubai crude oil — a benchmark for Middle East supply to Asia — has lost about a half of its value in the past year. Japan’s gasoline prices declined the most in almost six years last week.

  “Japan, a commodity importing country, gains a large advantage from the decline in crude oil prices,” Bank of Japan Governor Haruhiko Kuroda said in a speech to business leaders in Tokyo on Thursday.

  The decline “will lead to an increase in underlying prices from a somewhat longer-term perspective,” he said.

  CHEAP OIL

  Kuroda’s emphasis on the boost that cheaper oil will give to inflation over the longer term indicates additional easing is not imminent, said Maiko Noguchi, an economist at Daiwa Securities Co and a former BOJ official.

  Sixteen of 33 economists see the BOJ increasing its easing again before August, and the most popular forecast was for a boost at the second meeting in October next year, according to a survey of economists by Bloomberg News, conducted before the last policy meeting.

  The BOJ is counting on rising inflation expectations and a narrowing gap between supply and demand to eventually drive up consumer prices.

  Spending by consumers and businesses tumbled after Abe raised the sales tax in April, sending Japan into its fourth recession since 2008.

  Last month, he postponed another increase that was set for October by 18 months, putting the near-term focus on reviving the economy over reining in the world’s heaviest debt burden.
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