Economic data released in Japan over the Western holiday period has reinforced expectations that the Bank of Japan will make additional moves towards expanding its stimulus program in 2016. The yen has stood firm against the US dollar in recent weeks despite the Fed’s first rate hike in almost a decade. Prospects for looser monetary policy anytime soon were dulled following signs of accelerating growth in Asia’s second largest economy.
According to data released on Friday, unemployment was up more than expected in November. The proportion of people out of work in Japan increased to 3.3% in November from a 20-year low of 3.1% in October. An increase of 3.2% was forecast. Household spending was also disappointing, dropping by a bigger than expected 2.2% in November against forecasts of a much smaller 0.3% decline. On an annual basis, household spending was down by 2.9%, an acceleration from October’s 2.4% decline.
Poor Retail Sales
Retail sales also came in worse than expected, down by 2.5% in November following a 1.1% jump in October. On a 12-month basis, retail sales declined by 1% versus estimates of a 0.6% fall. Industrial production in November declined by 1%, worse than the 0.6% drop expected. However, strong growth in the previous two months guaranteed that output was 1.6% higher than a year ago.
The Bank of Japan’s forecasts for inflation and economic growth are largely dependent on consumer and business spending driving growth and falling unemployment pushing up wage inflation. But household spending has been only moderate and lower unemployment has failed to significantly boost wages.