One Green Shoot and Lots of Weeds in Japan’s Economic Data

Japan had a green shoot amidst recent economic data. Industrial production was up 5.2% in April over March. Unfortunately this shoot was found in a field of weeds.

Reuters reports the bad news:

The unemployment rate climbed to a seasonally adjusted 5.0% in April from 4.8% in March, according to data from the Ministry of Internal Affairs and Communications.

That marked the highest jobless rate in more than five years, though it matched the average estimate of analysts polled by Dow Jones Newswires.

“The unemployment rate is set to rise further throughout at least this year,” said Andreas Schuster, a strategist at CLSA Tokyo. “Considering that the current 5% underestimates the real extent of the problems on the job market, this bodes poorly for domestic consumption going forward.”

The number of unemployed in April was at 3.46 million, up 710,000 or 25.8% from the previous year, data showed.

Also Friday, the ministry reported that the average household expenditure for the month of April was 306,340 yen ($3,161), down 1.3% in real terms and down 1.4% in nominal terms from the year-ago result.

The decline was larger than a 0.6% drop expected by analysts polled by Dow Jones Newswires.

The rise in production was credited mostly to an inventory realignment. Inventories had been trimmed substantially earlier in the year and as orders picked up moderately business ramped up production. Production isn’t expected to fall back now that orders and inventory are more in balance but it isn’t expected to roar ahead either.

The decline in consumption shows just how difficult (impossible?) it is to substitute domestic demand for export demand in Japan. That seems to be the prescription everyone suggests for Japan to prosper in the future but it doesn’t look like the patient will tolerate the medicine.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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