Japan’s economy barely grew late last year, data released Friday suggest, as stagnant incomes, the slowdown in China and the mixed blessing of lower oil prices hobbled Prime Minister Shinzo Abe’s recovery strategy.
Abe’s push to revitalize the world’s third-largest economy took another blow with the resignation Thursday of economy minister Akira Amari, who is fending off graft allegations.
No major policy changes are likely, though Japan’s ratification of the 12-nation Trans-Pacific Partnership trade pact could be slowed by the departure of its lead negotiator.
The latest data show Japan’s core inflation rate slipped to 0.5 percent in 2015, as low oil prices hindered efforts by Prime Minister Shinzo Abe to spur growth by pushing prices higher.
Consumer spending fell 4.4 percent in December from a year earlier, as households chose to save rather than splurge on any gains from the low oil prices that are slowing inflation. It was the fourth straight month of year-on-year declines.
Industrial output fell 1.6 percent in December from a year earlier, partly due to slower demand for machinery and electronics components and devices in China.
“Today’s activity data were disappointing and suggest that Japan’s economy barely grew last quarter,” Marcel Thieliant of Capital Economics said in a commentary.
Abe took office three years ago vowing to get growth in the world’s third-largest economy back on track through massive injections of cash by the government and central bank, and by sweeping reforms to boost competitiveness.
The aim was to end a long spell of deflation, or falling prices, that was thought to be discouraging corporate investment. But while corporate profits have soared as massive stimulus weakened the yen, making earnings made abroad worth more when converted into yen, investment and wages have lagged.
Average incomes fell 2.9 percent from a year earlier in December. Even though unemployment was steady at 3.3 percent and the job market remained tight, companies wary over the economic outlook are opting not to raise pay.
Core inflation excluding volatile food prices was flat at 0.1 percent in December, though excluding both food and energy the consumer price index was 0.8 percent in December and 1 percent for all of 2015.
Some economists contend that the Abenomics focus on inflation as a spur to growth is misplaced.
A recent analysis by economists at the Asian Development Bank Institute concluded that the main obstacle to faster growth in Japan is its aging and shrinking population.
Wasteful and unproductive spending by local governments and the reluctance of banks to lend to small and start-up businesses are also slowing a restructuring of the economy needed to revitalize growth, it said.