The mixed economic data coming from Japan on the last working day of the week. In October, the third largest economy in the world reported progress in the labor market and a surprising increase in industrial production. However, inflation is still too low in the understanding of the central bank, while household spending decreased considerably. The confusing signals indicate clearly the challenges facing the Japanese Prime Minister Shinzo Abe, who with extensive circumstantial program intends to beat deflation and so hard to revive economic growth. According to official data of the Ministry of Economy, Trade and Industry of Japan the industrial production increased a seasonally adjusted basis in October to 0.2% in expectations for a decline of 0.6%. This is the second consecutive increase, but is much less than in September, when growth was 2.9%.
On an annual basis, output contracted by 1%, while economists’ expectations were much more pessimistic – a decline of 1.7%. In the second and third quarter industrial production shrank as manufacturers of cars and household appliances have shrunk their stocks because of the increase in the consumer tax in the spring.
Meanwhile the unemployment rate declined by 0.1 points to 3.5%. However, household spending fell by 4% yoy. This means that consumption remains weak, although economists had expected an even stronger negative trend. Excluding the effects of the recent increase in consumer tax, consumer prices rose by only 0.9%. The Japanese central bank has set itself the objective of reaching an inflation rate of two percent. The lower price of oil slows down the rate of inflation. Japan suffered for years of deflation – ie falling prices. Because of her customers refrain from buying because they expect recent new depreciation. Firms also leave their investments in the background and appointed fewer employees.
We remind that the Prime Minister Shinzo Abe announced ten days ago that the postponement of the second increase in the sales tax to 18 months. Earlier last week the National Bureau of Statistics in Tokyo announced that the Japanese economy has fallen into recession in the third quarter. Gross domestic product of the country of the rising sun slid 0.4% quarterly and 1.6% yoy in the period from July to September. Quarter earlier Japanese economy shrank by 7.1% per year, thus two consecutive quarters in the red led to the recession.
Shinzo Abe dissolved on Friday the lower house of parliament, paving the way for early elections on 14 December – just two years after being returned to power. With early elections Abe hopes to strengthen the power positions before its crash rating, currently some studies is under 40%, but still stable Japanese standards. According to observers, the early elections will be something like a referendum on the policies pursued by Abe called “Abenomics”. The vote comes at a period in which “Abenomics” does not develop as desired.