Tags: japan | unemployment | spending | economy

Japan Spending Slumps Even as Unemployment Hits 20-Year low

Thursday, 26 Nov 2015 10:51 PM

Japanese household spending unexpectedly fell in October for a second straight month, even as unemployment hit a two-decade low, underscoring the challenge facing premier Shinzo Abe in persuading reluctant companies to boost wages.

Consumer price inflation fell for the third consecutive month, but after excluding the effect of lower energy bills, household costs rose.

The data underlined the difficulty Abe faces as he campaigns for companies to spend more of their record profits on wages and investment, in the hope of pulling Japan out of recession.

"Job offers are surging but the average sum each employee is earning isn't rising much. That's why household income isn't increasing and consumption remains weak," said Taro Saito, senior economist at NLI Research Institute.

"It's quite difficult to generate a positive economic cycle just by applying political pressure on companies."

The jobless rate fell to 3.1 percent in October from 3.4 percent in September, hitting the lowest level since 1995, government data showed on Friday.

Household spending fell 2.4 percent in October from a year earlier, against market forecasts for a 0.1 percent rise, and disposable income slid 0.3 percent, separate data showed.

The core consumer price index (CPI), which excludes volatile fresh food but includes oil costs, fell 0.1 percent in the year to October, matching a median market forecast.

The decline was predominantly due to the effect of falling energy costs, which the Bank of Japan has said it will look through in determining whether additional monetary easing is necessary to achieve the inflation target.

Nearly two-thirds of goods and services making up the consumer price gauge saw their prices rise, underscoring the central bank's view that a broad uptrend in prices was intact.

Japan relapsed into recession in July-September and consumer price measures have slid on oil price falls and weak household spending, casting doubt on the BOJ's view that a solid economic recovery will accelerate inflation to its 2 percent target by early 2017.

Nearly half the analysts polled by Reuters expect the BOJ to increase monetary stimulus in January, when continued declines in oil costs may force the bank to cut its quarterly inflation forecasts yet again.

But many BOJ officials are reluctant to expand an already massive stimulus program unless weakness in overseas demand persists long enough to dent business confidence, discouraging companies from boosting investment and wages.

© 2017 Thomson/Reuters. All rights reserved.

   
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Japanese household spending unexpectedly fell in October for a second straight month, even as unemployment hit a two-decade low, underscoring the challenge facing premier Shinzo Abe in persuading reluctant companies to boost wages.
japan, unemployment, spending, economy
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2015-51-26
Thursday, 26 Nov 2015 10:51 PM
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