Household spending rose in August for the first time in three months and job availability improved to the best in more than two decades, signs that could temper concerns the economy has fallen into yet another recession.
The 2.9 percent year-on-year increase in household spending in August was more than the median estimate of 0.4 percent, and followed a 0.2 percent annual drop in July as consumers bought more cars.
A separate survey from the Bank of Japan showed corporate inflation expectations weakened slightly last quarter, which could bolster the argument that the central bank will ease monetary policy at the end of the month when it updates its long-term economic forecasts.
“Household spending and the tight labor market are a positive sign that the economy is chugging along,” said Norio Miyagawa, senior economist at Mizuho Securities.
“I don’t expect the BOJ (to) ease when it meets next week. The BOJ is likely to lower its consumer price forecasts at the end of the month, so it faces a test of credibility if it doesn’t ease policy then.”
The gains in auto sales are particularly encouraging, because it suggests this category has finally recovered from a tax increase that triggered a slump in compact car sales, Miyagawa said.
In addition to higher car sales, many consumers bought new air conditioners during a spell of unusually hot weather, a government official said.
According to government data, the jobs-applicants ratio rose to 1.23 in August from 1.21 in July. That is the highest since January 1992, when it logged 1.25. The latest result means that 123 positions were available for 100 job seekers.
The jobless rate was 3.4 percent in August, slightly more than the median estimate of 3.3 percent.
The number of unemployed rose a seasonally adjusted 1.8 percent from July to 2.24 million, the Internal Affairs and Communications Ministry said in a preliminary report.
The spending gains suggest the market turmoil caused by China’s slowing economy has done less damage to sentiment than initially feared.
The BOJ will meet from Oct. 6 to 7, but many economists are focused on its Oct. 30 meeting, when the central bank will recalculate its consumer price and gross domestic product forecasts.
Japanese firms expect consumer prices to have risen an average of 1.2 percent a year from now, according to the BOJ’s September tankan survey on Friday.
That was less than the 1.4 percent annual increase expected in the previous survey, which suggests the BOJ may have to gobble up even more assets to meet its 2 percent inflation target someday.
Some economists are also calling for the government to launch a stimulus package after a surprise fall in August industrial production increased the chance that the economy contracted in the July-September quarter, which would put Japan back in recession.