Japan received a sobering reminder yesterday of its fragile recovery: The jobless rate rose, deflation deepened and factories made fewer cars and mobile phones.
The figures underscore ongoing weakness in the world’s No. 2 economy even as Japanese corporations report stellar quarterly earnings. Along with fears of a slowdown in the US, Asian markets went lower yesterday, with traders cashing in recent gains.
Strong corporate earnings figures were unable to lift Tokyo’s downbeat sentiment as fears that the global recovery may be slowing sent dealers into sell-off mode.
PHOTO: AFP
Tokyo’s Nikkei gave up 1.64 percent, or 158.72 points, to close at 9,537.30 after the government released figures showing unemployment was rising and industrial production had unexpectedly dipped.
Sydney fell 0.68 percent and Seoul closed down 0.65 percent, while Hong Kong was 0.30 percent lower by the close and Shanghai had shed 0.40 percent.
“Momentum has faded more than producers and economists anticipated,” said Goldman Sachs analyst Chiwoong Lee of the drop in factory production.
The jobless rate rose to 5.3 percent, up for the fourth consecutive month and hitting its highest level since November last year, the government said. The actual number of jobless fell 1.1 percent from the previous year to 3.44 million, according to the Japanese Ministry of Internal Affairs and Communications. Those with jobs declined 0.3 percent to 62.8 million.
Meanwhile, industrial production retreated 1.5 percent last month from the previous month as factories reduced output of large passenger cars and cellphones. It was the first fall in fourth months.
Companies surveyed by the government expect factory production to fall 0.2 percent this month, then climb 2 percent next month.
Deflation persisted as Japan’s core consumer price index (CPI), which excludes fresh food, fell 1 percent from a year earlier for the 16th consecutive month of decline.
The government’s new tuition fee break for high school students was a big contributor to the drop in the CPI, dragging education costs down 13 percent, the ministry said.
The core CPI for Tokyo — considered a barometer of broader price trends — fell 1.3 percent this month, pointing toward another nationwide drop this month.
Lower prices may boost individual purchasing power, but deflation is generally bad for an economy. It plagued Japan during its “Lost Decade” in the 1990s, hampering growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.
Japan’s central bank says it does not tolerate deflation, but it expects prices to continue falling for the next couple of years. The new numbers may increase political pressure for the Bank of Japan to intensify the fight against deflation.
In a separate report, the ministry said average monthly household spending rose a real 0.5 percent last month.
Economists cited hot weather and government incentives for purchases of energy efficient appliances as driving the increase.
“However, the weak production data and rise in inventories indicate that the recovery in household consumption will likely be short-lived,” RBS Securities Japan chief economist Junko Nishioka said.
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