TOKYO: Japan’s inflation rate ticked up in November, posting the first gain in five months, official data showed Friday, but still-weak household spending weighed on the world’s number three economy.
The tepid figure—a 0.1 percent gain in core inflation excluding volatile fresh food prices—offered a glimmer of hope for Tokyo’s bid to conquer years of deflation, after the economy narrowly sidestepped a recession last quarter.
But the latest inflation number remains way below the Bank of Japan’s 2.0 percent target, as officials struggle to convince cautious firms to usher in big wage hikes to stir spending.
A falling price spiral in Japan for years put consumers off buying in the hopes of getting goods cheaper down the road, denting firms’ expansion and hiring plans. That has weighed on growth in the wider economy.
In November, household spending fell 2.9 percent from a year ago, the third monthly decline.
Friday’s weak figures came despite signs of a tight labor market, with the headline unemployment rate at a near two-decade low of 3.3 percent, slightly up from 3.1 percent in October.
Japan’s economy saw a slight uptick in the July-September quarter, rising 0.3 percent—and reversing an earlier forecast of a contraction that had risked putting the country into recession for the second time in as many years.
A lackluster global economy, marked by the slowdown in China and weakness in emerging markets, is posing challenges to the recovery.
Tokyo has approved an extra spending budget to stimulate the still-weak economy.
The latest inflation data followed three months of consecutive declines and a flat reading in July, according to the internal affairs ministry.
The gain was mainly due to a slowing decline in oil prices, as well as rising prices of travel-related goods and services, the ministry said.
“The price gain was too small given the [BoJ’s] 2.0 percent target,” said Yusuke Shimoda, economist at Japan Research Institute.
“While prices are expected to improve moderately, it will take time to achieve that ambitious goal. I don’t think the Bank of Japan will take additional steps for now, but the market is pressuring the BoJ to launch more stimulus.”
Last week, Japan’s central bank announced an unexpected tweak to its vast monetary easing program in a bid to power a recovery in the economy.
BoJ policymakers rolled out a series of changes, including boosting their holdings in firms dedicated to capital spending and new hiring.
They also made some other changes—including hiking the bank’s exposure to longer-term bonds—after wrapping up their last policy meeting of the year.
The announcement comes as analysts raise concerns the BoJ would struggle to scoop up enough bonds under its 80 trillion yen ($665 billion) annual asset-buying scheme—which effectively prints money to spur lending.
The central bank’s stimulus, launched more than two years ago, is a cornerstone of Prime Minister Shinzo Abe’s attempt to kickstart the long-lumbering economy with a policy blitz dubbed Abenomics.
BoJ chief Haruhiko Kuroda said he was keeping a close eye on how much cash firms hand out in winter bonuses, and in spring wage negotiations.
Policymakers hope that putting more cash in shoppers’ wallets will spur spending and move Japan closer to the bank’s inflation target.
Kuroda also left the door open to further stimulus, saying there was “no limit” to what policymakers might do to boost growth.
He last year shocked markets with an unexpected expansion to its already huge asset-purchase scheme.