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Japan’s core consumer inflation notched another month above the water line in February, but ongoing contraction in household spending accelerated to the fastest pace since August.

Japan’s core consumer price index, which excludes the cost of fresh food, rose 0.2 per cent year on year in February, according to the Ministry of Internal Affairs and Communications. That was the second consecutive month of growth for the gauge after 12 months of contraction and came in dead-on a median forecast from economists polled by Reuters.

But consumer prices excluding both food and energy costs rose 0.1 per cent (compared to 0.2 per cent in January) while the headline CPI rose 0.3 per cent (0.4 per cent in January).

The rise in the core gauge of consumer inflation will come as good news for Japan’s central bank, which kept monetary policy on hold in March and offered no hint of future rate rises as it continues to fight to reach its inflation target of 2 per cent.

Data on household expenditures will be less welcome: overall household spending dropped 3.8 per cent year on year in February, more than tripling from January’s contraction of 1.2 per cent and falling far beyond a median forecast from economists calling for a drop of 1.7 per cent.

In contrast with spending trends, Japan’s jobless rate saw further improvement, dropping to 2.8 per cent from 3 per cent in January and marking the lowest level since June 1994. The job-to-applicant ratio held at the previous month’s level of 1.43, still the highest level since June 1991.

Copyright The Financial Times Limited 2017. All rights reserved.
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