TOKYO: Japan released a string of lacklustre economic data on Friday, with inflation hitting its lowest level in a year, dealing another blow to Tokyo’s attempts to conquer years of falling prices and tepid growth.
The figures come after Prime Minister Shinzo Abe called a snap election for next month and delayed a sales tax hike after a previous levy increase hammered spending and pushed the world’s number three economy into recession.
Japanese consumer inflation came in at 2.9 percent in October compared with a year earlier, official data showed, matching market forecasts but slowing from 3.0 percent in September.
Prices mainly rose largely because Tokyo raised the sales tax from 5.0 percent to 8.0 percent on April 1.
Adjusted for the hike, nationwide core inflation rate came in at 0.9 percent, against 1.0 percent in the previous month and its lowest level since October 2013.
The weak reading makes the Bank of Japan’s 2.0 percent inflation target—which it initially aimed to hit next year—look increasingly out of reach.
The BoJ shocked markets last month by saying it would expand its asset-buying stimulus program to about 80 trillion yen ($676 billion) annually, as part of Tokyo’s bid to overcome deflation and kickstart the economy.
“Even despite the BoJ’s surprise move, we maintain our view that there is a very long way to go before achieving the +2.0 percent target,” Credit Agricole said.
The yen weakened further after the reading with the dollar at 118.21 yen against 117.74 yen in London on Thursday.
Also Friday, figures showed factory production in October edged up a better-than-expected 0.2 percent on-month, the second straight increase, as exports improved.
“It is a positive set of data that hints at hopes for future recovery in production,” SMBC Nikko Securities said in a note.
Separate figures showed the country’s unemployment rate slipped to 3.5 percent from 3.6 percent, while retail sales rose 1.4 percent in October. However, household spending fell 4.0 percent on-year, the seventh successive decline.
“Although real GDP growth continued to be negative into July-September and Japan was in technical recession, demand for labor among firms is still robust likely thanks to the waning impact of [the]consumption tax hike,” said Marcel Thieliant from Capital Economics.
But “despite the tight labor market, inflation continues to moderate . . . Price pressure should moderate further in the near-term, as the recent plunge in crude oil prices has yet to be reflected in the cost of energy imports,” he added.
April’s tax rise—designed to help pay down one of the world’s largest public debt mountains—delivered a body blow to Abe’s efforts to rev up growth, just as the long-laggard economy appeared to be turning a corner.
In response, Abe put off another hike due in late 2015 and called a snap election for next month that he described as a referendum on his policies, although observers said it was a strategic move to fend off party rivals ahead of a leadership vote next year.
Abe’s growth blitz—dubbed Abenomics—was launched in 2012 and calls for big government spending as well as massive monetary easing and an overhaul of the highly regulated economy.