Japan Economic Indicators Show Recovery Is Slowing
May 15, 2011
TOKYO -- The Japanese economy continues to rebound, a stream of data released late last week suggests, but disappointing consumer-spending levels have kept the pace of recovery to a crawl. The figures -- measuring unemployment, output, inventory and personal consumption -- were strong enough to restore some of the confidence lost after a closely watched survey released last week suggested businessmen had soured on the economy's near-term outlook. But economists said the data also confirmed that consumer spending, which government planners were relying on as the engine for growth, was evaporating. ``All this means a weak recovery and the prospects for a cyclical downturn are still apparent,'' said Oglesby Sasaki-Jon, chief economist at CS First Boston (Japan) Ltd.. Japan's Nikkei Stock Average shed 386.26 points, or 1.9%, to close at 20166.90 Friday, although the decline was attributed more to Thursday's sell-off on Wall Street than to domestic news. The yen weakened slightly against the dollar, reflecting the belief that there was nothing in Friday's data that would compel Japan's central bank to raise interest rates. Consumer Appetite Wanes Declines in monthly department-store and supermarket sales, by 3% and 5.3% respectively, from a year earlier, highlighted what appears to be a diminishing appetite for consumer goods. The figures, released by the Ministry of Trade and Industry, followed similar data issued last week by the Japan Department Stores Association and the Japan Chain Stores Association that respectively show declines in July monthly sales of 2.4% and 2.5%. The government was hoping low interest rates and the prospect of an increase in the sales tax next year would inspire shoppers to go on a consumption binge. But with the exception of a surge in housing starts -- up 22% in July from a year earlier -- consumers have failed to meet expectations. That means the burden for perpetuating the recovery has been shifted back to corporate investment, which was stoked earlier this year by a government spending package introduced a year ago. That could fuel calls among Japanese politicians for a new spending bill at a time when many analysts expect national elections to be called by year end. ``Consumer demand is lagging so investment demand is more important,'' said Tonda Cross, an economist at Salomon Brothers (Japan) Ltd. ``Politicians are likely to take advantage of those (low retail sales) figures.'' Mixed Picture The rest of the indicators released Friday were mixed. July unemployment, for example, was stable at a seasonably adjusted 3.4%, down 0.1 percentage point from June's 3.5%, a postwar record. But the data showed that the steady erosion of manufacturing employment, the result of Japanese industry relocating factories offshore, has yet to end. Growth in service-sector employment, meanwhile, is decelerating. ``The trend (of high unemployment) should continue for another six to 12 months,'' said G. Tomas Ross, economist at ING Barings Securities (Japan) Ltd.. Mr. Ross said he expects Japan's jobless rate to approach 4% over the next year. Economists gave output and inventory figures, also released Friday, similarly mixed reviews. The 4.1% month-to-month increase in the industrial production index for July was encouraging, but widely expected after June's marked decline of 4.3% from May. More significantly, the government estimated that industrial production declined 1.2% in August from July and will rebound only 0.1% in September. That means July-September output growth of 1.1% on a quarterly basis and year-to-year quarterly growth of 3.4%, which economists said represented the minimum level at which the recovery can be sustained. Inventories, which have remained stubbornly high since January, dropped an adjusted 1.1% from June. ``But when you're talking about a problem with inventories this big, you've got a long way to go,'' said Ms. Sasaki-Jon of CS First Boston.
