Japan's latest data beats expectations, but the uptick may be short-lived

Japan has just released a huge raft of economic data and – excluding some of numbers that look terrible due to the impact of last year’s sales tax increase – almost all have come in above expectations.

Unemployment fell 0.10% to 3.40% in March with the decline equaling the the multi-year low struck in December 2014. The number employed rose by 210,000 to 63.19 million on a year earlier – an increase of 0.3% – while unemployment dipped by 180,000 to 2.28 million – a substantial 7.3% below the level seen in March 2014.

As widely expected, following horrible retail sales data earlier in the week, household spending plummeted by 10.6% in the year to March although – as was the case with sales – the figure was largely due to the effects of households bringing forward spending before the sales tax increase of April 2014. While the drop looks terrible, it was less than the 12.1% contraction expected by markets.


And while stronger than expected, household incomes continue to go backwards in real terms (adjusted for inflation). Average monthly incomes were 0.30% lower than a year earlier.

Perhaps the most important data point out when it comes to monetary policy considerations for the BoJ is national CPI, which rose by 2.30% year-on-year to March – higher than the 2.20% level of February. 

Adding to the surprise lift in the headline rate, core CPI – which excludes prices for fresh food – rose by 2.20%, up from February’s 2.00% level and expectations of 2.10%.

However, Tokyo core inflation in April – a forerunner to potential moves in the national gauge next month – fell to 0.4% on year due to higher base effects resulting from the sales tax increase. Worryingly, it was below the 0.5% level expected and well off the 2% level targeted by the BoJ.

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