Don't Be Fooled By Japan's Rebound, Deflation Shows It's Still Dying

JAPAN’S economy is showing signs of recovery but, in the long term, its prospects still look grim. New official figures on April 30th showed that household spending, wages and job openings all improved last month. However, the spectre of deflation has still to be banished. March was the 13th successive month of year-on-year declines in inflation: excluding volatile fresh-food costs, they were 1.2% lower than a year earlier.

To the politicians, the positive news on spending and employment gave a sunny start to Golden Week, Japan’s week-long national holiday, which began on Thursday. But beneath the headline figures, the details are less glittery. Household consumption is up in large part because of temporary subsidies on low-energy appliances and cars from last year’s stimulus package, which are due to expire soon. The improvement in pay was a paltry 0.8% year-on-year. Despite the rise in vacancies, the ratio of employment-seekers to jobs is still a gloomy two-to-one.

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