HEAVY machinery is silhouetted against illuminated buildings on the city skyline as it stands on a construction site at dusk in the Toyosu area of Tokyo, Japan.
Industrial production in Japan rose less than expected in July, while household spending slumped and the inflation rate remained unchanged, highlighting the challenge of reflating the world’s third-largest economy.
Output expanded by 0.2 percent from June, according to the trade ministry, less than the forecast for a 1.0-percent gain in a Bloomberg News survey of 31 economists. Consumer prices, excluding fresh food, rose 3.3 percent from a year earlier, the same pace as June, the statistics bureau said.
Today’s data underscores weakness in the economy following a sales-tax hike in April that’s hurting consumption. It also puts pressure on the government and Bank of Japan Governor Haruhiko Kuroda to consider adding stimulus to support the economy before another planned increase in the levy.
“We are still at the bottom without a rebound,” said Junichi Makino, chief economist at SMBC Nikko Securities Inc. in Tokyo. “The situation is fueling concern that the government might not raise the sales tax as planned. The likelihood of a supplementary budget is rising.”
The yen was little changed at 103.72 per the US dollar at 10:50 a.m. in Tokyo while the Topix index of shares fell 0.3 percent, declining for a second day.
Output will expand 1.3 percent in August from July, and grow 3.5 percent in September, according to the results of a trade ministry survey. The ministry’s assessment that production has weakened was unchanged.
The unemployment rate was 3.8 percent and household spending fell 5.9 percent from a year earlier, separate data showed. Overall inflation was 3.4 percent and 2.3 percent, excluding perishable food and energy.
“This slew of data today is weak,” said Hideo Kumano, an economist at Dai-ichi Life Research Institute in Tokyo. “While the economy isn’t about to get worse there’s no momentum for a turnaround.”
The central bank has said that consumer prices will increase about 1.25 percent for some time before accelerating to reach its 2-percent inflation goal. Stripped of the effect of the higher sales levy, inflation was 1.3 percent in July, according to the BOJ’s estimates.
Kuroda has said that he expects inflation to reach the target around the fiscal year starting April 2015. Only four of 33 economists surveyed by Bloomberg News agree this achievable, with 26 percent of them forecasting October as the most likely month for further monetary easing.
Private consumption, which comprises almost 60 percent of the economy, fell 5 percent in the second quarter from the previous three months as people cut spending after the 3-percentage-point increase in the sales levy to 8 percent in April.
Prime Minister Shinzo Abe will decide by the end of this year whether to raise the tax to 10 percent in October 2015.
The economy contracted 6.8 percent in the three months through June. It will grow by an annualized 2.7 percent in the July-to-September period, according to a Bloomberg News survey of economists, as the impact of the higher tax fades.
Inflation generated by the BOJ’s easing and the sales tax are cutting into consumers’ spending power. Adjusted for rising prices, disposable incomes fell 5.2 percent in July from a year earlier, data released on Friday showed. Bloomberg News
Pedestrians wait to cross a street at Shibuya shopping district in Tokyo on Friday. Japan’s vital signs remained weak in July, as wages fell further and household spending dropped, signaling continued weakness in the world’s third-largest economy. Data released on Friday showed the inflation rate was unchanged from the previous month. The core price consumer index that excludes volatile fresh food prices rose 3.3 percent in July, the same as a month earlier. (AP/Koji Sasahara)