publish time

28/11/2015

author name Arab Times

publish time

28/11/2015

Shoppers choose vegetables at a market in Tokyo on November 27, 2015. Japanese consumer prices fell 0.1 percent in October year-on-year, official data showed on November 27, as the government mulls ways to safeguard its fragile economy. Shoppers choose vegetables at a market in Tokyo on November 27, 2015. Japanese consumer prices fell 0.1 percent in October year-on-year, official data showed on November 27, as the government mulls ways to safeguard its fragile economy.

TOKYO, Nov 27, (Agencies): Japan on Friday published a string of mostly weak data, the first major figures since news that the world’s number three economy had slipped back into recession.

A key inflation gauge showed prices fell in October from a year ago, while spending by households also dropped in a double blow for Prime Minister Shinzo Abe’s high-profile growth blitz, dubbed Abenomics.

The weak figures came despite signs of a tight labour market, with the headline unemployment rate at a two-decade low of 3.1 percent, down from 3.4 percent in September.

But even the jobless numbers highlight a growing red flag for the economy — the rise of part-time work at lower wages.

“Employment is rising, but those jobs are mostly part-time,” said Dai-ichi Life Research Institute’s chief economist Yoshiki Shinke.

“The supply/demand balance for stable, permanent positions is not firm. As a result, we are seeing more employment in low-wage jobs.”

Earlier this month, official figures showed that Japan’s gross domestic product (GDP) shrank 0.2 percent in the July-September period, or an annualised contraction of 0.8 percent, marking the second straight quarterly decline.

In response to the recent weakness, Abe on Friday ordered his government to draft an extra stimulus budget.

The economy dipped into a brief recession last year after consumers tightened their belts following an increase in Japan’s consumption tax, which dealt a blow to signs that Abe’s bid to spur the once-stellar economy was working.

That downturn spurred the Bank of Japan (BoJ) to sharply increase its already massive bond-buying programme — a cornerstone of Abenomics — effectively printing money to boost lending.

While Tokyo’s efforts sharply weakened the yen — beefing up firms’ profits — and stoked a stock market rally, its impact on an economy beset by years of deflation has been less convincing.

Down

Japan’s jobless rate fell to a 20-year low in October, but consumer spending and incomes also edged down as the tight labor market failed to spur significant increases in wages.

The latest figures are likely to help Prime Minister Shinzo Abe’s effort to cajole companies into offering higher wages, to accelerate inflation by raising consumer demand through higher incomes.

So far, short-handed employers have resorted to use of overtime and hiring more temporary workers, seeking to avoid increases in base wages that would be difficult to reverse if the economy takes a turn for the worse.

The government reported Friday that unemployment in the world’s No. 3 economy dipped to 3.1 percent in October, compared with 3.4 percent in September. It was the lowest level since July 1995.

Consumer spending, meanwhile, fell 2.4 percent from the same month a year earlier, and average incomes fell 0.9 percent.

Japan’s inflation rate also was lower in October, with core inflation excluding volatile food prices down 0.1 percent for the third month in a row.

The success of the government’s “Abenomics” policies hinges on getting consumers and companies spend to more. Abe has also launched social welfare initiatives aimed at easing the burden of child care and elder care to help encourage more women to work.

This week, Abe appealed to business leaders to offer bigger wage increases during next year’s spring “shunto,” or “labor offensive,” when unions and companies hash out pay agreements for the year.

Abe has pledged to slash corporate taxes in exchange for progress on wages. The government also intends to raise the minimum wage, which is now at a modest 798 yen ($6.50) an hour on average, by 3 percent a year, aiming to get it up to 1,000 yen ($8.15) an hour by 2020.

Big companies, reaping record profits thanks to strong export earnings, can afford that.

However, most people paid the minimum wage work for small and medium-size companies that cannot afford to pay more, said economist Masamichi Adachi of JPMorgan.

“Those small tiny firms, which are always losing money and don’t pay taxes, are not making money at all. If they have to raise wages their losses will grow and they will find it hard to survive,” he said.

Daiwa Institute of Research economist Satoshi Osanai said Japan’s economy was “out of gear”, with most of Abenomics’ benefits limited to the country’s boardrooms.

“That’s why consumption is still weak, even though employment got better,” Osanai added.

“(Any) economic improvement remains at the corporate level and has not spread to other areas, such as the household sector.”

The figures on Friday showed that core inflation, which excludes volatile fresh food prices, fell 0.1 percent in October, marking the third consecutive monthly decline.

Falling gasoline prices were the key culprit in pulling the index down, the internal affairs ministry said.

Meanwhile, household spending for the month fell 2.4 percent, underscoring consumer caution.

The latest figures will turn attention back to the BoJ ahead of its policy meeting next month to see whether it adds to its 80 trillion yen ($653 billion) annual stimulus programme.

Last week, Japan’s central bank held fire on expanding the scheme despite news of another recession and evidence of weak exports.

However, the BoJ has been forced to cut its growth outlook and push back the timeline for a key inflation target as earlier, more optimistic predictions failed to come true.

The price target is a key part of Japan’s bid to exit years of deflation.