Mixed economic news from Japan yesterday.
Consumer prices fell at a slower pace in May and retail sales rose.
But the rate of growth in retail sales slowed sharply as the impact of government stimulus eased.
The figures suggest that the export-led recovery in Japan is spreading, curbing the intense deflationary grip and starting to boost take home pay and consumer confidence.
But there’s also the growing sense that the government stimulus spending and tax changes that has been supporting cars, appliances and other sectors, is running out of steam.
Consumer prices excluding fresh food fell an annual 1.2% in May, an improvement from April’s 1.5% (which was boosted by a change to the payment of some school fees).
That was still the 15th consecutive decline.
Compared to April, core CPI was 0.1% higher, a small positive, and when the changes to school fees are excluded.
The fall in core inflation was even bigger: estimates suggest it was around 0.65% lower than a year earlier.
Prices excluding energy and food fell 1.6% in May, matching the previous month’s record drop.
The change in school tuition fee (they were waived by the Government accounted for about half of the fall in May).
Japan’s retail sales rose at the slowest pace since January, a sign economists said suggested that the impact of the stimulus spending was dissipating.
The extend of the slowdown can be seen from the 2% fall in May’s sales from April’s level when sales leapt 4.9%.
That prompted economists to forecast a rise of 4.8% for May, which was wide of the mark.
That was the biggest fall in five years.
Car sales slid 5.9% from April and household machinery sales (appliances such as flat- screen TVs) dropped sharply (more than halving) from April.
Vehicle sales were up a still solid 13.3% in May from a year earlier, but that was sharply down from the 19.5% annual rate over March and April.
Sales growth of machinery and equipment, which includes flat panel TVs, slowed to 5.8% growth from 13.8% in April, a fall of 7.9% month on month.
But Japan’s export-led recovery is beginning to spur business investment.
More than half the country’s exports are heading to China, with an increasing share heading elsewhere into Asia.
So business investment is starting to show signs of expanding.
The Bank of Japan’s quarterly Tankan survey of corporate sentiment on Thursday is tipped to show companies aim to boost spending by 0.9% in the year ending March 31, 2010, the first increase for three years.
Salaries and wages rose 1.6% in April as staff worked more overtime to keep up with rising demand.
