Japanese economic data out today looked pretty good

Derek Zoolander, blue steel exporter. Source: Village Roadshow.

The Japanese economy is looking pretty good in 2017, with readings on inflation, unemployment and household spending all performing well in June.

On the prices front, core consumer price inflation (CPI), which excludes fresh food prices, grew by 0.4% in the year to June, a result that was in line with expectations and unchanged from the level recorded in May.

So-called core-core CPI, a measure that removes energy and food prices and is more akin to core inflation readings used by other major central banks, was steady from a year earlier.

Both readings still sit well below the Bank of Japan’s (BoJ) 2% inflation target.

Tokyo core CPI, released one month ahead of the national figure, rose by 0.2% from a year earlier, an improvement on the flat reading of May and expectations for an increase of 0.1%.

Headline CPI, excluding all price movements, rose by 0.4% from 12 months earlier, unchanged from a month earlier.

All readings remain very weak, but for a nation that has been consistently battling deflationary forces for close to three decades, the fact that these readings are either flat or slightly higher year-on-year is a positive outcome nonetheless.

And if the labour market released alongside the CPI data is anything to go by, the BoJ’s attempts to boost inflationary pressures may be helped by a pickup in wage growth.

According to figures released by the government, the national unemployment rate tumbled to 2.8% in June, equaling the lowest level seen since June 1994.

That was an improvement on the 3.1% rate seen in May, and breezed past expectations for a decline to 3.0%.

Reflecting just how tight labour market conditions are in Japan right now, the jobs-to-applicants ratio — something that measures the number of jobs available to the number of persons seeking work — jumped to 1.51 from 1.49 in May, leaving it at the highest level since February 1974.

Expressed another way there are now 151 jobs available for every 100 job seekers — who wouldn’t like those odds?

Strong labour market conditions are also starting to be reflected in Japanese wage growth.

According to data from Japan’s labour ministry released earlier this month, regular worker pay rose by 0.9% in May from a year earlier, the fastest increase since March 2000.

Taking into account inflation, real wages increased by 0.1% over the same period, following a flat reading in April. That was the first positive reading in five months.

Overtime pay also increased by 0.7% from a year earlier, the biggest increase in 13 months.

Perhaps strong labour market conditions may finally see a wage acceleration? We’ll see.

Other data released today was also relatively strong.

Household spending levels lifted 2.3% from a year earlier, surpassing the 0.6% gain forecast by economists. That was an improvement on the 0.1% drop seen in the year to May and marked the fastest growth since August 2015.

Retail spending levels also increased from a year earlier, growing by 2.1% from 2.0% in May. Despite the improvement, it fell just short of market expectations centred around a gain of 2.3%.

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