Japanese Inflation Made a Small Gain But Household Spending Fell

The Bank of Japan’s key inflation gauge eked out a small gain in March, the jobless rate was little changed and household spending slumped in the last major batch of monthly economic data for the first quarter.

Consumer prices excluding fresh food rose 2.2 percent from a year earlier, the statistics bureau said on Friday. Stripped of the effect of a sales-tax increase last April, core inflation -- the central bank’s key measure -- was 0.2 percent -- after touching zero in February.

The data comes after Governor Haruhiko Kuroda and his policy board refrained from adding to monetary stimulus this week, even as they pushed back the time needed for Japan to reach the 2 percent inflation target. Kuroda said the delay is due to falling oil prices, and the bank sees price rises accelerating from October as wage gains flow through into higher consumption.

“Economic indicators suggest Japan’s recovery momentum isn’t as strong as we expected,” said Masaki Kuwahara, an economist at Nomura Securities Co. in Tokyo. “Yet, looking ahead, exports will probably increase because of the U.S. recovery, boosting capital spending, which can be a driver for the economy.”

Japanese stocks fell, with the Topix index dropping 0.7 percent at 9:41 a.m. in Tokyo, extending declines from Thursday. The yen weakened 0.2 percent to 119.63 per dollar and has depreciated 22 percent since Kuroda launched record monetary stimulus in April 2013.

Labor Market

“The labor market continues to tighten and prices are holding out after pricing in a rebound in oil,” said Takahiro Sekido, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. and a former BOJ official.“Once the effect of the sales tax increase disappears, I think inflation for April to June won’t be that bad.”

The jobless rate for March was 3.4 percent, versus estimates from economists for a 3.5 percent increase. Household spending, a key to further price gains, dropped by 10.6 percent in March from a year earlier, compared with projections for a contraction of 11.8 percent. Spending has fallen for 12 straight months after a sales tax was increased last April.

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