TOKYO: Japanese industrial output has increased the most in more than three years while retail sales slid and inflation slowed, underscoring strength in export industries and weak domestic demand.
Production jumped 4 percent last month from the previous month, exceeding forecasts with the biggest gain since June 2011, according to trade ministry data. Retail sales fell 1.3 percent, household spending dropped and the central bank’s main inflation measure slowed to 0.2 percent, excluding sales tax effects. A pick up in exports driven by the weaker yen and stronger demand in the US helped fuel manufacturing. The drop in the exchange rate is also increasing costs for households that have seen living expenses outpace incomes, highlighting the stakes for Japanese Prime Minister Shinzo Abe as he tries to get companies to boost pay in this spring’s negotiations with labor unions.
Some policymakers at the BOJ view further monetary easing to shore up inflation as a counterproductive step for now, amid concern it could trigger declines in the yen that damage confidence, people familiar with the talks said earlier this month. Economists at JPMorgan Chase & Co last month said that Japan is likely to fall back into a temporary spell of deflation by next month that could last through November. Economists at BNP Paribas SA estimate prices falling as early as this month. Twenty-six of 35 economists in a Feb. 5-10 Bloomberg survey forecast the BOJ would expand monetary stimulus by the end of October. Even with consumer price gains slowing, the cost of living is still outpacing pay gains. Wages adjusted for inflation fell 1.7 percent in December last year from a year earlier, an 18th straight drop, according to government data released earlier this month.
