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Japan spending gets leap year boost, but broader outlook remains dim

AFP-JIJI, Kyodo

Spending by Japanese families increased in February for the first time in six months, government data showed Tuesday, but analysts said the rare piece of good news for Prime Minister Shinzo Abe is likely to be short-lived.

Abe came to power in December 2012 vowing to rejuvenate the world’s third-largest economy by ending deflation — a debilitating decline in consumer prices that has suppressed spending for years.

But the prime minister’s eponymous Abenomics policies, which include the Bank of Japan buying massive amounts of government bonds and introducing a negative interest rate, have so far failed to achieve his goals.

Household spending rose 1.2 percent in February from the same month last year, the Internal Affairs and Communications Ministry data showed, the first gain since August.

The result surprised economists who had foreseen a 1.9 percent decline, according to a Bloomberg market forecast.

Economists, however, likely overlooked the positive effect of the extra day in February due to a leap year, said Taro Saito, senior economist at NLI Research Institute.

“The economy overall is leveling out,” he said.

The government last week said that consumer inflation remained stuck at zero in February for the second straight month as falling energy prices and a higher yen driving down the cost of other imports continued to weigh on consumer prices.

Also weighing on the economy are government plans to again raise the consumption tax from the current 8 percent to 10 percent next year.

Powerful government finance mandarins say Japan needs the extra revenue to tackle the mounting national debts as the country ages and its population declines.

Going ahead with the plan is seen as likely to send the economy further into the doldrums, as did the last increase in April 2014.

Now, influential voices including Nobel Prize-winning economists Joseph Stiglitz and Paul Krugman, who both visited Japan this month, have urged Abe to postpone the increase.

Separate economic data released Tuesday showed the unemployment rate increased to a seasonally adjusted 3.3 percent in February, up 0.1 percentage point from the previous month, the first rise in three months.

Separate data showed the country’s job availability remained unchanged at 1.28 in February, meaning that 128 positions were available for every 100 job seekers.

Despite the rise in unemployment, the employment situation continues to improve, a government official said.

The unemployment rate for men rose 0.2 percentage point from the previous month to 3.6 percent while that for women fell 0.1 point to 2.8 percent, according to the Internal Affairs and Communications Ministry’s preliminary data.

The number of unemployed people increased a seasonally adjusted 1.9 percent to 2.16 million, while the number of workers fell 0.9 percent to 64 million.

The number of people who voluntarily resigned their jobs rose a seasonally adjusted 3.5 percent to 880,000.

Household spending, a key indicator of private consumption, marked the first year on year rise in six months, the ministry said in a separate report, although a different ministry official said the increase came because 2016 is a leap year.

The preliminary report said average monthly household spending in February gained an inflation-adjusted 1.2 percent from a year earlier to ¥269,774.