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Japan’s core consumer prices rose, albeit barely, for the first time since December 2015 last month, but that was paired with the sharpest drop in household spending since August.

The fall in spending came as Japan’s core consumer price index, which excludes the cost of fresh food, rose 0.1 per cent, according to the Ministry of Internal Affairs and Communications – the first growth for the gauge in 12 months and besting a median forecast predicting no change form a year prior. Consumer prices excluding both food and energy costs rose 0.2 per cent, while the headline CPI rose 0.4 per cent.

Overall household spending dropped 1.2 per cent year on year in February, well beyond contraction of 0.3 per cent in January and a median forecast from economists surveyed by Reuters calling for a drop of just 0.4 per cent.

That came on the heels of the what appeared to be steady improvement in January, when contraction in spending was the smallest since July 2015.

Japan’s jobless rate came in at 3 per cent, down from 3.1 per cent a month earlier and the lowest level since August 1994. However, the job-to-applicant ratio held from the previous month at 1.43, still the highest level since June 1991.

Corporate Japan has been adjusting to make life better for employees, but improvements to working conditions to attract staff while keeping down the cost of employment – even at the expense of sales – do not lead to higher wages, incomes or consumption, helping to explain how companies keep prices under control.

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