Mixed outlook for world's third largest economy

Japanese financial data indicates Prime Minister Shinzo Abe’s stimulus policies having only minor effect on economy

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

Japanese data released on Friday cast a shadow over the Bank of Japan’s (BOJ) optimism, with experts are doubtful over the country’s economic recovery gaining ground. While Japan’s labour market and manufacturing output shows signs of improvement, consumer spending remains fragile. 

Data which highlighted the fastest first quarter expansion in one year signaled the Japanese economy emerging from a tax hike-induced recession last year. Upon the news, the central bank described the economy as “continuing to recover moderately," while adding that it forecasts a growth above a potential and desired spike in the country’s inflation rate.  

Japanese consumers still show reluctance to spend. Household spending declined by 1.3 percent, lower than the 3 percent rise anticipated by analysts from the same month a year ago when Japan raised the sales tax.

Japan's core consumer price index — which includes oil products but excludes fresh food prices — rose by 0.3 percent in April, slightly higher than the forecast increment of 0.2 percent. 

Inflation is still far from the BoJ’s 2 percent target. 

Japan’s unemployment rate has fallen to a 18 year low to 3.3 percent, but experts believe that the data was driven by individuals leaving the job market. 

Conversely, factory output was better than expected as it gained for the first time in three months. Official data showed a 1.0 percent rise from the previous month as a weak yen and growth in profit coinciding with Japanese Prime Minister Shinzo Abe’s so called “Abenomics” benefited manufacturers. 

According to Manufacturers surveyed by Japan’s Ministry of Economy, Trade and Industrial production will rise 0.5 percent in May before falling 0.5 percent in June.

However, persistent flaws in the Japanese economy will keep pressure on policymakers to take further measures in order to boost recovery. 

TRTWorld and agencies