Japan got a double dose of good economic news Friday with the release of healthy industrial production and consumer price figures that underline continued recovery of second-largest economy in the world.
Optimism was tempered by a drop in household spending and a report showing that unemployment remained steady at 4.1 percent in August, but investors still cheered the news.
The overall figures point in the right direction for Prime Minister Shinzo Abe, who took office Tuesday and is under pressure to continue the economic revival that began under his predecessor, Junichiro Koizumi.
Industrial production rose 1.9 percent in August from the previous month, while shipments jumped 2.5 percent, the Ministry of Economy, Trade and Industry said Friday, adding that output is on an upward trend.
While output is forecast to slip 0.1 percent in September, it is seen rising 1.8 percent the following month, the ministry said.
The core consumer price index rose 0.3 percent in August, the government said separately, offering fresh evidence that the economy is steadily pulling out of deflation.
The increase matched the average forecast for an advance of 0.3 percent by economists surveyed by Dow Jones Newswires, and follows a rise of 0.2 percent in July.
The core CPI data, which exclude volatile fresh food prices, suggest the economy is shaking off deflation and appear to validate the Bank of Japan’s decision to raise interest rates in July for the first time in six years.
The key overnight call rate was raised to 0.25 percent from virtually zero, and attention is now focused on whether the central bank will raise rates again sometime late this year or early next year.
Japan has, until recent months, faced deflation, a continuing drop in prices that dampens economic activity by bringing down wages and profits. Most industrialized nations worry about the opposite danger — inflation.
While recent data show deflation seems to be easing, the government has not yet declared victory over falling prices.
“Since there was a long period of deflation, we need to make a careful decision on whether the economy has really overcome it,” Chief Cabinet Secretary Yasuhisa Shiozaki said Friday. “We need to make sure the situation will not return to deflation.”
On the labor front, the unemployment rate remained unchanged at 4.1 percent in August, a hair above the eight-year low reached earlier this year and matching the forecast of economists surveyed by Dow Jones Newswires.
The jobless rate has declined steadily since 2003, dipping to 4.1 percent in July from 4.2 percent the month before. The seasonally adjusted figure for August is just above the eight-year low of 4.0 percent reached in May.
One cause for alarm, however, was a 4.4 percent drop in spending in August by households headed by wage-earners. That indicates households are spending less as the pace of wage increases slows.
The figure was much worse than an average forecast of a 1.7 percent drop, according to a Dow Jones survey of economists.
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