Japanese unemployment hit a seven-month high last monthwhile industrial production and household spending fell, adding to evidence that the world’s second-largest economy is slowing down.
Industrial production declined 0.3 per cent in April, the government said, while unemployment rose 0.2 percentage points to 4 per cent and overall household spending fell 2.7 per cent.
“The data suggests the Japanese economy is moderating gradually but certainly isn’t falling off a cliff as it has done when other external slowdowns occurred,” said Glenn Maguire, chief Asia economist at Société Générale in Hong Kong.
Japan’s exports, which have held up well thanks to demand from emerging economies, are also showing signs of slowing down. Such a slowdown will take its toll on production and capital spending, and eat into overall growth.
The economy expanded at the slowest pace in three years in the first quarter (year-on-year) due to sluggish capital spending. However, consumer spending was surprisingly resilient, albeit dull, even in the face of higher energy and food prices.
The restrained consumer expansion offers a glimmer of hope that Japan will be able to weather an external slowdown better than it did in the late 1990s and 2001. But with higher prices, spending is unlikely to show any exuberance.
A few months of positive wage data suggest that demand for certain skilled labour is helping drive up salaries even though other recent figures suggest that employment demand is slowing.
“One of the key features of the Japanese economy at the moment is this strengthening in wages in the context of a weaker labour market,” said Mr Maguire.
“If that continues, which I think it will, then you won’t necessarily see the typical response, which is consumption weakening in line with the labour market.”
Japan’s April consumer price index, excluding fresh food, rose 0.9 per cent in April, slower than March’s pace, but that was due to the brief lapse in the fuel tax, which has since been reinstated.
Core consumer prices, excluding fresh food and energy, fell 0.1 per cent, confirming that rising prices were due to external factors. Tokyo’s May consumer price data showed core inflation of 0.1 per cent, government data showed.