Japan Economy: Front-Loaded Demand Underpins Economy – March 2014
Published 16 April 2014
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Japanese unemployment falls to 3.6% - a 6-and-a-half year low. Core CPI inflation remains steady at 1.3%. Retail sales continue to be strong, led by high ticket items ahead of April’s VAT increase. Question remains what would happen after the tax introduction.
0.1 Detail
Japan’s unemployment rate in February fell slightly to 3.6%. This is the lowest it has been since July 2007. Both male and female unemployment fell by 0.2% to 3.7% and 3.3% (a 16 year low), respectively. The improvement in the labour market has been driven by an increase in the number of non-regular workers which has increased by 890,000 over the last year. Over the same time, the number of regular workers fell by 540,000. By sector, employment in the medical, ICT and whole/retail sales has led job creation.
Core CPI (excluding fresh food) was unchanged at 1.3% in February. Core-core CPI (excluding food and energy) increased slightly to 0.8% (0.7%). The figures suggest that more stable energy prices were offset by increases in other items – particularly durable goods. Preliminary core CPI for March in the Tokyo area, which is considered a leading indicator for national inflation, also increased to 1% (0.9%).
Retail sales in February increased 3.6% Y-o-Y to 10.9 trillion yen (£64bn). This is the third highest figure recorded in February. Sales in ‘big ticket item’ such as cars (14.9%) and white goods (11.2%) increased strongly. Sales of refrigerators are up 160.9% YoY and TVs 52.1% ahead of April’s VAT rise. However, household expenditure fell by 2.5% in real terms over the year. This decline largely reflects a fall in recreational spending due to poor weather in February.
0.2 Comment
As expected, the data confirms that Japanese consumers are bringing forward purchases of goods to avoid the increase in VAT. The question is how far will GDP fall in the next quarter as a result? Finance Minister Aso today said that the Government will spend at least 40% of all public investment planned for 2014-15 by June and over 60% by September in order to help offset the expected fall in demand. The rate of GDP growth later this year will be a key statistic for the Government to be able to publically confirm that they plan to raise the VAT rate again in October 2015.
0.3 Disclaimer
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