Japan household spending at nine-year high as "Abenomics" gains momentum

Tue Apr 30, 2013 12:06am EDT
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By Stanley White and Kaori Kaneko

TOKYO (Reuters) - Japan's household spending surged in March at the fastest pace in nine years in a sign that Prime Minister Shinzo Abe's bold efforts to end two decades of stagnation are lifting consumer confidence and setting the stage for an economic revival.

A recent run of data has provided encouraging early hope that Abe's push for aggressive fiscal and monetary policies to get the world's third-largest economy motoring is having the desired effect.

Separate data on Tuesday also showed the jobless rate fell to the lowest in more than four years, providing another piece of evidence that domestic demand could play a critical role in underwriting economic growth in coming months.

While Japan's industrial production rose less than expected in March due to tepid demand overseas, economists are confident that exports and factory output will eventually pick up due to a weaker yen.

On the whole, the figures suggest that expectations for Abe's combination of fiscal spending, monetary stimulus and structural reforms, known as "Abenomics," are having a positive impact on the household sector although the corporate sector is lagging behind.

"I expect the first quarter gross domestic product growth to exceed an annualized 2 percent, and if the corporate sector catches up with households, the pace of growth could accelerate," said Yoshiki Shinke, senior economist, Dai-Ichi Life Research Institute.

"Recovery in exports has been slow and so has industrial output, but as a weak yen is expected to impact shipments from now on, exports and factory output will pick up in coming months."

Abe's policy mix has so far driven the yen to a four-year low against the dollar and sparked a 50 percent rally in Japanese share prices from November, which has helped buoy consumer sentiment.   Continued...

A kimono-clad woman walks in front of a luxury brand store at Tokyo's Ginza shopping district April 11, 2013. REUTERS/Issei Kato