Japan Output Gains as Tokyo Prices End Four-Year Slide: Economy
The pace quickened from 0.9 percent the previous month, a Trade Ministry report showed in Tokyo today. National consumer prices fell for a sixth month in April, separate data showed. At the same time, a price gauge for the city of Tokyo rose in May for the first time in four years, a gain that may point to a shift in the next national reading, according to SMBC Nikko Securities Inc.
The International Monetary Fund endorsed Abe’s policies and Bank of Japan easing today, saying that a slide in the yen is “not problematic,” provided the government rolls out a “complete package” of fiscal and structural reforms. Abe and BOJ Governor Haruhiko Kuroda can achieve 2 percent inflation in the near to medium term so long as additional measures complement BOJ easing, according to the IMF.
“Abenomics is improving corporate and consumer sentiment, helping to fuel people’s inflation expectations little by little,” said Yoshimasa Maruyama, chief economist at Itochu Corp. (8001) in Tokyo. “Japan is getting closer to emerging from deflation.”
The gain in industrial output exceeded the median forecast of 30 analysts for a 0.6 percent increase. The highest estimate was for 1.5 percent.
Tokyo consumer prices excluding fresh food rose 0.1 percent in May from a year earlier, the statistics bureau said today. The national price gauge fell 0.4 percent in April, matching the median estimate of 29 economists in a Bloomberg News.
In a report on Japan, the IMF said a “concrete and credible” plan to make public debt sustainable is urgently needed. According to the IMF, achieving the inflation goal will depend on successfully implementing growth strategies and reforms, efforts that the government describes as the “third arrow” of Abenomics, in addition to fiscal and monetary stimulus.
The Topix index closed 0.1 percent higher in Tokyo, after a 3.8 percent decline yesterday. A 6.9 percent slide on May 23 was the biggest since March 2011, when an earthquake and tsunami triggered a nuclear crisis. The gauge is up 32 percent this year. The yen was at 100.62 a dollar, down about 14 percent this year. Apple Inc. said it had raised some product prices in Japan, including for iPad tablet computers.
India reported today first-quarter gross domestic product rose less than 5 percent for a second quarter, compared with an average annual pace of about 8 percent in the past decade.
Reversals in Japan’s stock rally have coincided with a jump in government bond yields as central bankers attempt to stoke inflation in a nation with 15 years of entrenched consumer-price declines. Along with monetary and fiscal stimulus, Abe, 58, plans a structural reform package to be unveiled next month.
Abe said May 17 that he aims to get annual private investment back to 70 trillion yen ($695 billion), the level before the depths of the 2008 financial crisis, through deregulation, taxes, spending and equipment-leasing deals. The figure was an annualized 65.15 trillion yen in the first three months of 2013, down for a fifth straight quarter.
“Capital investment at home is still unimpressive,” Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo, said today. “However, given that business sentiment is improving and corporate profits are expanding with the yen’s weakness, we can expect Japanese companies will reverse their cautious attitude to investment and start to spend gradually, which will provide support for industrial output.”
The prime minister also outlined a target of tripling infrastructure exports to about 30 trillion yen by 2020. Abe has said he will reveal his full growth plan ahead of the Group of Eight summit in Northern Ireland on June 17-18.
Japan’s economy expanded the most in a year in the first quarter as pledges for monetary easing weakened the yen and boosted shares, supporting exports and consumer spending. Outlines of the third-arrow initiatives encompass plans from boosting the participation of youth and women in the workforce to making it easier for new businesses to start up and joining the Trans-Pacific Partnership trade talks.
Economy Minister Akira Amari, who last week said there was “no need to be perturbed” by the May 23 tumble in stocks, yesterday said that the government’s growth strategy is the most important of its three-pronged approach to reflating the economy.
Benchmark 10-year government bonds yielded 0.86 percent today, up from 0.56 percent four weeks ago and 0.455 percent on April 4, the day that Bank of Japan Governor Haruhiko Kuroda unveiled his plan to achieve 2 percent inflation in two years.
A rapid rise in yields can affect the economy and people’s livelihoods, and the central bank will deal with the increase appropriately, Amari said.
The central bank yesterday increased the frequency of its monthly asset purchases after bond-market participants told officials that changes were needed in the wake of increased volatility. The BOJ said in a statement that it will buy government debt about eight to 10 times a month starting in June, compared with about eight times now.
In Tokyo, Bank of Japan Deputy Governor Hiroshi Nakaso said today that seizing the opportunity to overcome deflation and spur sustainable growth is “our manifest mission.”
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