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In a previous edition of Piponomics, I wrote about how Japan’s latest inflation reports suggest that it might be losing its battle against deflation. This week’s set of economic data provides more clues on whether or not the Japanese economy is in a rut.


Household spending and retail sales data for August gave mixed results, as the former chalked up a worse than expected 4.7% year-over-year decline while the latter showed a stronger than expected 1.2% annualized uptick. Still, it paints pretty much the same picture as in July, when household spending saw massive 5.9% drop while retail sales marked a decent 0.5% increase.

Looking closer at how these figures were calculated shows that retail sales simply comprises a subset of household spending, which accounts for the change in the inflation-adjusted expenditures of consumers. This goes to show that overall spending remains very weak and that consumers are still struggling months after the sales tax hike was implemented.


The August jobs report seemed a little more upbeat, as the unemployment rate improved from 3.8% to 3.5% during the month. Forex market participants were expecting to see no change from the July reading.

Components of the labor report reflected stability, as the availability of jobs maintained its highest level in 22 years. The jobs-to-applicants ratio, which is considered a gauge of labor market demand, stood unchanged at 1.10. However, the number of new job offers declined by 0.7% in August and is down by 0.6% on a year-over-year basis.


The preliminary industrial production report was another downer, as it printed a surprise 1.5% decline instead of showing the projected 0.2% increase. Economic experts appear to be getting concerned about the ongoing slump in industrial production, which could spell negative prospects for exports and overall growth.

“We’ve had two quarters of consecutive decline in production,” noted Takuji Okubo, principal and chief economist at Japan Macro Advisors. “With consumers suffering under the weight of consumption tax, it has to be exports or capital expenditure that drives the Japanese economy. But from what we’re seeing in industrial production, that doesn’t seem to be happening, so the Japanese economy is basically without a driver.”

Not only did these weak figures spur talks of additional easing from the BOJ, but these also led some market watchers to speculate about another recession in Japan. Although BOJ Governor Kuroda still remains adamant that the Japanese economy will sustain its moderate recovery, Prime Minister Abe might be forced to downgrade his economic assessment sooner or later.

Do you think the BOJ is bound to ease again? Share your thoughts in our comments section or cast your votes in our poll below!