Japanese inflation remained tepid while spending rose after 13 months of declines, official data showed yesterday, with analysts predicting more easing ahead as the central bank tries again to build up a head of steam.
Core inflation, excluding volatile fresh food prices, was up 0.1 percent year-on-year, beating market expectations of zero growth, but coming still well short of the Bank of Japan’s (BOJ) 2 percent target.
Separate data from the internal affairs ministry showed household spending rose 4.8 percent year-on-year last month, posting the first rise since Japan hiked sales taxes in April last year to help pay down a huge national debt.
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However, spending has not yet recovered to the pre-hike level and analysts were sticking to the view that the Bank of Japan will almost certainly be forced to expand its monetary-easing scheme to jack up prices and counter a downturn in the economy.
The good news is that the jobs market is improving.
While the jobless rate was unchanged at an 18-year low of 3.3 percent last month, the labor ministry said the ratio of job offers to jobseekers rose to a 23-year high of 1.19, meaning there were 119 offers to every 100 applicants and suggesting an even lower jobless rate in coming months.
“Unfortunately, though, there are scant signs that the tighter labor market has resulted in stronger price pressure,” Capital Economics economist Marcel Thieliant said.
“The big picture remains that there is still substantial spare capacity in the economy which is dragging down prices,” he said in a note.
Economists at SMBC Nikko Securities said that more and more housewives and senior people were joining the workforce.
“We should give heed to the fact that increasing labor supply is easing the tightening of the labor market and curbing wages,” they said in a research note.
“The BOJ’s scenario of higher wages leading to home-made inflation is unlikely to happen,” they said.
SMBC Nikko expected Japan’s core consumer prices to fall as much as 0.8 percent year-on-year by October due to drops in energy prices.
JPMorgan Chase & Co said that Japan’s economy is slowing to a halt this quarter, cutting its growth estimate due to weak trade and consumer spending.
The Japanese economy is expected to mark zero growth in the three months through June, JPMorgan economist Masamichi Adachi said in a report, lowering a previous forecast for an annualized expansion of 1.5 percent.
“Incoming hard data related to consumption have been consistently weaker than our expectation,” Adachi wrote.
A “large” decline in Japan’s net trade reported last week also dimmed his estimate for growth in the quarter.
“We still expect that the consumption will strengthen in summer, particularly with the expected rise in summer bonuses, which are paid mainly in June. Still, our confidence to the strength of consumption is now lower than before,” Adachi said.
Additional reporting by Bloomberg
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