Japan February consumer inflation steady, spending hit by weather

Thu Mar 27, 2014 8:59pm EDT
 
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By Tetsushi Kajimoto and Stanley White

TOKYO (Reuters) - Japan's core consumer prices rose for a ninth straight month in March from a year earlier and labor demand improved - further evidence the economy is making headway against years of deflation and stagnation.

Ministry of Finance data showed household spending and retail sales weakened in February as snowstorms across Japan kept many consumers at home, but there are already signs that sales are accelerating this month as shoppers rush to beat a sales tax hike on April 1.

The dip in consumer spending may be disappointing to some, but continued tightness in the labor market could bolster expectations that the economy can weather the sales tax rise to 8 percent from 5 percent, and rebound after a temporary slump in the April-June quarter.

"The gradual increase in prices is consistent with a narrowing in the negative output gap," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. (A negative output gap shows the economy is performing below full capacity.)

"The employment situation will also continue to put some mild upward pressure on prices. Consumer spending came in weak, but it will rebound next month."

The 1.3 percent annual gain in the core consumer price index, which includes oil products but excludes volatile fresh food prices, matched the median estimate in a Reuters poll.

The gain followed a 1.3 percent rise in January and December, which was the quickest since the 1.9 percent seen in October 2008.

The narrower inflation index, which excludes food and energy prices and is similar to the core index used in the United States, rose 0.8 percent in the year to February.   Continued...

 
A pedestrian with an umbrella walks near a souvenir shop during a heavy snowfall in Asakusa district in Tokyo February 8, 2014. REUTERS/Yuya Shino