Japanese household consumption declined in April and inflationary pressures eased sharply, raising doubts regarding the expectations of moderate economic recovery and the return of inflation to the central bank's 2 percent target. However, the jobless rate in Japan fell unexpectedly to a 18-year low and industrial production rose in April, extending a glimmer of hope.
Household spending declined 1.3 percent year-on-year in April, data from the Ministry of Communications and Internal Affairs showed Friday. That missed forecasts for a increase of 3 percent following the 10.6 percent drop in March.
Economists were looking for an increase as the impact of the sales tax rise in April last year has ended.
The consumer price index climbed 0.6 percent annually in April, sharply slower than the previous month's 2.3 growth. That was in line with economists' expectations. Core inflation, which strips out the volatile costs of fresh food, moved up 0.3 percent, slower than the previous month's 2.2 percent increase. Economists had predicted 0.2 percent core inflation.
Month-on-month, overall consumer prices rose a seasonally adjusted 0.4 percent in April, same as in the previous month. Core inflation eased to 0.3 percent from March's 0.4 percent rise.
Inflation in the Ku-area of Tokyo region, considered a leading indicator for the nationwide trend, also slowed to 0.5 percent in May from 0.7 percent increase in the previous month. Inflation was in line with economists' expectations.
Core inflation for Tokyo also dropped to 0.2 percent in May from 0.4 percent in April. Economists had expected CPI to rise 0.2 percent.
On a monthly basis, the seasonally adjusted CPI in Tokyo was unchanged, compared to April's 0.1 percent rise. Core prices were also stable, same as in April.
On the brighter side, industrial production rebounded on month in April after declining in the previous two months, data from the Ministry of Economy, Trade and Industry revealed Friday. Industrial production climbed a seasonally adjusted 1.0 percent month-over-month in April, in line with expectations, reversing a 0.8 percent fall in March.
Electronic parts and devices, electrical machinery and fabricated metals were the industries that mainly contributed to the increase in April.
Shipments rose 0.4 percent in April, reversing a 0.6 percent fall in the previous month. Inventories remained stable in April, compared to the previous month's 0.4 percent increase.
On an annual basis, industrial output dropped 0.1 percent in April, much slower than previous month's 1.7 percent decrease. The figure matched consensus estimate.
Japan's unemployment rate dropped unexpectedly to an 18-year low in April, falling to a seasonally adjusted 3.3 percent from 3.4 percent in March. Economists had expected the rate to remain stable at 3.4 percent.
At the same time, the employment rate rose marginally to 57.3 percent in April from 57.1 percent in March. The labor force participation rate rose to 59.4 percent from 59.1 percent.
The number of unemployed people increased to 2.34 million in April from 2.28 million in the preceding month. The number of individual employed increased to 63.24 million in April from 63.19 million in the previous month.
"With economic activity sluggish and price pressures subdued despite a tighter labor market, we remain convinced that the Bank of Japan will have to step up the pace of easing before too long," Capital Economics Japan Economist Marcel Thieliant said.
For comments and feedback: editorial@rttnews.com