The latest economic data from Japan is providing some good news for Prime Minister Shinzo Abe as he tries to demonstrate that his “Abenomics” economic program is still going strong.
In a slew of data released on Friday, the core consumer price index – a key gauge of broader economic activities – increased 1.2% in November.
That is the fastest pace since October 2008 when the impact of the global financial crisis was beginning to take hold. Inflation has been rising in recent months, but many economists have pointed out that higher imported costs, especially for energy, have been behind much of the increase.
Unlike its U.S. counterpart , Japan’s core rate includes energy, although it excludes often-volatile fresh food prices. But they now say that there are at least some signs that prices are also being pulled higher because of increased demand at home.
Such demand-driven inflation is considered vital to ensuring that the higher prices help lift the overall economy, rather than just saddling businesses and consumers with higher costs that translate into lower consumption.
Excluding energy costs, Japan’s prices rose 0.6%, helped by increases in some consumer durable goods such as television sets, laptops, desktops and ACs and also hotel prices. The pace of increase was the fastest in 15 years.
“The index, excluding fresh foods and energy prices, has risen considerably. Some elements of good inflation can be observed,” said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.
There are also signs that the benefits of the Bank of Japan8301.TO +3.62%’s easing are now trickling through the broader economy.
The program, based on massive purchasing of government bonds, had helped to weaken the yen and drive share prices up more than 90% from their winter low into the spring, but they had left most people little better off.
Gradually, though, signs of improvements are spreading to different parts of the economy, with positive data on jobs, higher household spending and greater optimism among the smaller companies that had borne the brunt of the downturn.
Friday’s data showed jobs-to-applicants ratio rose to 1.00 in November – the highest since October 2007, meaning there are enough jobs for all jobs seekers. Household spending was up 0.2% in November from the year ago level, following a 0.9% increase in October.
Outside of the government sphere, data from the Japan Tourism Agency earlier this month found that the country attracted a record number of foreign tourists this year – more than 10 million, offering a boost to the jobs-heavy leisure and entertainment industry.
The latest quarterly BOJ tankan survey showed the business sentiment among non-manufacturing small and medium enterprises turned positive for the first time in 21 years, at the same time major manufacturers were at their most upbeat in six years.
“We are seeing an ideal economic recovery,” Mr. Nagahama said. The data wasn’t all roses, with industrial production falling short of expectations with a scant 0.1% rise. And one set of figures is far from enough to declare victory.
In addition the economy is expected to face a fair headwind when the sales tax is raised in April to 8% from 5%.
That is expected to take growth from the 3.4% annual rate expected by private sector economists polled by the Japan Center for Economic Research for the current quarter, down to an annualized contraction of 4.6% from April to June. But at least the figures were something of an early New Year’s present for Mr. Abe.
wsj.com
In a slew of data released on Friday, the core consumer price index – a key gauge of broader economic activities – increased 1.2% in November.
That is the fastest pace since October 2008 when the impact of the global financial crisis was beginning to take hold. Inflation has been rising in recent months, but many economists have pointed out that higher imported costs, especially for energy, have been behind much of the increase.
Unlike its U.S. counterpart , Japan’s core rate includes energy, although it excludes often-volatile fresh food prices. But they now say that there are at least some signs that prices are also being pulled higher because of increased demand at home.
Such demand-driven inflation is considered vital to ensuring that the higher prices help lift the overall economy, rather than just saddling businesses and consumers with higher costs that translate into lower consumption.
Excluding energy costs, Japan’s prices rose 0.6%, helped by increases in some consumer durable goods such as television sets, laptops, desktops and ACs and also hotel prices. The pace of increase was the fastest in 15 years.
“The index, excluding fresh foods and energy prices, has risen considerably. Some elements of good inflation can be observed,” said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.
There are also signs that the benefits of the Bank of Japan8301.TO +3.62%’s easing are now trickling through the broader economy.
The program, based on massive purchasing of government bonds, had helped to weaken the yen and drive share prices up more than 90% from their winter low into the spring, but they had left most people little better off.
Gradually, though, signs of improvements are spreading to different parts of the economy, with positive data on jobs, higher household spending and greater optimism among the smaller companies that had borne the brunt of the downturn.
Friday’s data showed jobs-to-applicants ratio rose to 1.00 in November – the highest since October 2007, meaning there are enough jobs for all jobs seekers. Household spending was up 0.2% in November from the year ago level, following a 0.9% increase in October.
Outside of the government sphere, data from the Japan Tourism Agency earlier this month found that the country attracted a record number of foreign tourists this year – more than 10 million, offering a boost to the jobs-heavy leisure and entertainment industry.
The latest quarterly BOJ tankan survey showed the business sentiment among non-manufacturing small and medium enterprises turned positive for the first time in 21 years, at the same time major manufacturers were at their most upbeat in six years.
“We are seeing an ideal economic recovery,” Mr. Nagahama said. The data wasn’t all roses, with industrial production falling short of expectations with a scant 0.1% rise. And one set of figures is far from enough to declare victory.
In addition the economy is expected to face a fair headwind when the sales tax is raised in April to 8% from 5%.
That is expected to take growth from the 3.4% annual rate expected by private sector economists polled by the Japan Center for Economic Research for the current quarter, down to an annualized contraction of 4.6% from April to June. But at least the figures were something of an early New Year’s present for Mr. Abe.
wsj.com
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