–Retail Sales Up on Seasonal Demand but Somewhat Slower as It is Dangerous to Stay Outdoors for Long
–Factory Output Rebounds, Government Upgrades View
–Unemployment Rate Up on Surge in Quits for Better Positions Amid Widespread Labor Shortages
By Max Sato
(MaceNews) – The killer heat wave is wreaking havoc across Japan, claiming many lives and sending others to hospitals. It also boosted consumer prices at a time when many households are being hit by higher utility bills, data released Friday showed.
Consumer inflation in Tokyo, the leading indicator of the national average, came in firmer than expected in August but that doesn’t mean the Bank of Japan will have to raise interest rates at a faster pace as its policy stance is linked to its own estimate of medium-term inflation expectations, not to lagging indicators.
The core CPI (excluding fresh food), closely watched by the central bank, rose 2.4% on year, just above the consensus call of a 2.3% increase, following a 2.2% gain in July, according to the Ministry of Internal Affairs and Communications.
The government ended its 18-month-long subsidies in June for July bill payments and dangerously high temperatures around 40 degrees Celsius boosted durable goods prices including air conditioners. But seeing his popularity slide further, Prime Minister Fumio Kishida revived a similar scheme for three months ending in October when heat and humidity tend to linger.
Later Kishida announced that he would not seek re-election at the Liberal Democratic Party leadership convention in late September, taking the blame for widespread political funding scandals at the ruling party, a key factor behind sluggish voter support for the administration.
A surge in fresh food prices drove the year-on-year rise in the total CPI to 2.6% from July’s 2.2% as the heat wave caused an unusual short supply of rice, leading to the sharpest price markup for the primary staple in 20 years. The annual rate for the core-core CPI (excluding fresh food and energy) crept up to 1.6% from 1.5% in July. The costs for processed food markups picked up again after easing in recent months.
Meantime, Japanese payrolls posted their 24th straight rise on year in July amid widespread labor shortages while the unemployment rate unexpectedly worsened to 2.7% from 2.5% in June but that’s because a lot more people quit to look for better openings and people began to look for work again after a brief lull, data from the Ministry of Internal Affairs and Communications showed.
Sharp gains in medical/welfare and academic/tech services led the employment gain. Manufactures and transporters continued trimming jobs from year-earlier levels. The construction industry resumed hiring.
In its monthly economic report released Thursday, the government continued to describe employment conditions as “showing signs of improvement.” It upgraded its overall economic assessment for the first time in six months, noting consumer spending is supported by wage hikes and temporary income tax credits, but the change in wording is subtle and it continues to say the economy is recovering “moderately.”
Looking at corporate activity, industrial production rebounded 2.8% on the month in July after slumping a downwardly revised 4.2% in June following a 3.6% gain in May, data from the Ministry of Economy, Trade and Industry showed. The increase was widespread (14 out of 15 industries) led by telecom equipment and production machines but it was softer than the median economist forecast of a 3.7% rise.
Going forward, the METI’s survey of producers indicated output is set to show a setback, down 0.9% in August and a further 3.3% in September, largely in payback for July’s rebound.
From a year earlier, factory output rebounded 2.7 percent, as largely expected, following a downwardly revised 7.9% plunge in June and a 1.1% rise in May.
The ministry upgraded its assessment, saying industrial output is “taking one step forward and one step back.” Previously, it said output “has weakened while taking one step forward and one step back.”
The METI repeated that it will keep a close watch on the effects of global economic growth but dropped its reference to automobile production. There was concern over the impact of partial shutdown at some of Toyota factories following more revelations of false safety test records in June, this time at Toyota Motor itself, instead of its subsidiaries. Suspended output at Toyota group firms over a safety test scandal earlier this year triggered a widespread slump beyond the auto industry, hurting consumption and business investment and leading to contraction in first quarter GDP.
In another METI report, retail sales rose 2.6% on the year in July for a 29th straight increase as largely expected. Record high temperatures in many regions boosted demand for air conditioners, refrigerators and beverages, but the pace of increase moderated from a 3.8% gain as it was not safe to stay outdoors for long.
On the month, retail sales marked their fourth rise in a row, edging up 0.2%, as expected, after rising 0.6% in June. The METI maintained its assessment after upgrading it for the second straight month for the June data, saying retail sales are “on an uptrend.”