Japan’s Production Declines, Jobless Rate Increases
Japan’s industrial production and household spending slipped in May and the unemployment rate unexpectedly increased, in signs that the recovery of the world’s second-largest economy may slow.
The figures underscore Japan’s reliance on exports to propel its rebound, and follow calls by the US for Japanese policy makers to stimulate domestic demand. For Prime Minister Naoto Kan, facing a mid-term election in less than two weeks, the figures may pose a warning that it is too soon to tighten fiscal policy to shrink the nation’s debt.
The jobless rate reached 5.2 per cent in May, the third straight monthly increase and the highest level since December, the statistics bureau said in Tokyo. Household spending retreated 0.7 per cent from May 2009, the office also said, a day after another report showed retail sales slowed last month. Factory output dropped 0.1 per cent from April, the Trade Ministry said, compared with the median forecast in a Bloomberg News survey of 24 economists for a flat reading.
Export Driver
Exports have been driving the nation’s recovery from its worst post-war recession, led by demand from Asia. Spending by Japanese households has relied on government incentives to purchase cars and electronic appliances, and been insufficient to rid the economy of deflation.
“Japan’s growth has yet to be sustained by domestic demand alone,” said Yoshimasa Maruyama, a senior economist at Itochu Corp in Tokyo. “The recovery will continue as long as exports keep growing.”
Companies accumulated stockpiles at the fastest pace in more than five years in May as shipments fell, the Trade Ministry said, indicating global demand may be cooling. Inventories rose 2 per cent, the most since August 2004, and shipments slid 1.7 per cent. Still, businesses plan to increase production by 0.4 per cent in June and 1 per cent in July, according to the report.
Japan's lost 2 decades of no growth and deflation.