Japanese inflation stalled in July, household consumption fell much more sharply than anticipated and the jobless rate rose, suggesting policymakers may have to take new action to help the economy recover after the weakest quarter of economic growth in nearly three years, reports FastFT.
Core consumer prices (CPI) - all price excluding fresh food - rose 3.3 per cent year on year in July - the same pace as in June. Stripped of any impact of Japan’s increase in the sales tax in April, core prices rose 1.3 per cent.
CPI measures “what consumers actually pay, including the consumer tax,” so the data must be adjusted to account for Japan’s national sales tax being increased from 5 to 8 per cent in April.
Many analysts say the recent stall in inflation suggests the Bank of Japan’s war against deflation is wearing thin.
Meanwhile, household consumption fell 5.9 per cent from a year ago, doubling the expected 2.9 per cent loss. This is the fourth straight month of declines since the April sales tax increase.
Household consumption was the key driver pulling second quarter GDP down by an annualised rate of 6.8 per cent. Policymakers have expressed hope that consumers would reopen their wallets in the third quarter, so the bigger than anticipated drop should be worrying.
Meantime, the jobless rate unexpectedly rose to 3.8 per cent, the highest since November. Economists had forecast the rate holding at 3.7 per cent.
