Japan Spending Picks Up

Japan’s household spending rose in June after 15 months of declines, official data showed late Friday, as the government battles to make a clean break from deflation and stoke economic growth.

The upturn is a boost for Prime Minister Shinzo Abe, who has been trying to ignite growth in the world’s third largest economy for more than four years with mixed results, Kyodo reported.

Japan’s prospects have recently improved on the back of solid exports, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm. But consumer spending has remained a concern while the Bank of Japan has struggled to lift inflation despite years of aggressive monetary easing.

Household spending in June rose 2.3% year-on-year, according to the internal affairs ministry, widely beating market expectations for a rise of 0.5% and stemming a losing streak dating back to March 2016. Spending on housing repairs, linked to high demand for air conditioners in hot weather, and automobile purchases were major contributors, the data showed.

A separate report from the ministry showed nationwide inflation edged up 0.4% year-on-year, after stripping out the volatile costs of fresh food.

It was the sixth consecutive month of increase but the recent gains have largely been due to higher energy costs rather than a broad-based rise backed by stronger consumer spending. “Inflation remains very low despite the continued tightening of the labor market,” said Marcel Thieliant, senior Japan economist at Capital Economics.

The jobless rate sank to 2.8% in June from 3.1% in May, while the ratio of job offers to job seekers remained at four-decade highs.