/

Output rises 0.8% in tax hike rebound

AP

Industrial output recovered slightly in May from an earlier decline sparked by April’s sales tax hike, stabilizing as factories produced more machinery, vehicles and electronic devices, government data showed Monday.

Factory output in the world’s third-largest economy climbed 0.8 percent in May from a year earlier, and was up 0.5 percent from the month before, the Ministry of Economy, Trade and Industry said in a preliminary report. Output fell 2.8 percent in April.

Manufacturers have rising inventories and are forecasting a decline in output in June before a further recovery in July and beyond, the report said.

Assuming output falls as expected in June, Japan’s manufacturing will likely fall 3.1 percent in the April-June quarter, Marcel Thieliant, an economist with Capita Economics, said in a commentary Monday.

“The rise in industrial production in May suggests that the sector is recovering from the weakness caused by the consumption tax hike,” he said.

The sales tax hike to 8 percent from 5 percent is expected to cause a contraction in the economy in the April-June quarter, as demand fell following a rush of purchasing to beat the tax hike.

Japan’s economy was the one of the best performing in the industrial world in the first three months of the year, growing 6.7 percent from the year before and helping to push unemployment to 30-year lows.

Prime Minister Shinzo Abe has championed an economic strategy aimed at halting years of deflation by setting a 2 percent inflation target. The theory is that companies and households will spend more now if they expect things to cost still more in the future due to the inflation being stoked.

But for most families struggling to get by on incomes that have been falling since 1997, wages must rise to increase or keep purchasing power constant. Despite some of the biggest wage hikes in years for employees at some of the biggest companies, such as Toyota Motor Corp., the incomes of salaried households fell a real 4.6 percent from the year before in May, to an average ¥421,117, the eighth straight monthly decline.

So far, wage hikes have been seen mainly in limited categories of workers, most of whom are contract or freelance employees in areas such as trucking and construction.

While there are shortages of labor in some key industries, the recovery so far is not helping push base wages higher for workers as a whole.