Japan: Prices pressures ease, stronger industrial output - BBH

Research Team at BBH, suggests that the Japan released a mixed bag of data which showed that in Japan, the prices pressures continue to ease while the household spending fell more than twice what was expected and the industrial output was stronger than forecast, helped by a surge in auto output in addition the unemployment ticked up to 3.1% from 3.0%.  

Key Quotes

“Headline CPI remained negative (-0.5% vs. -0.4% year-over-year) in August for the fifth consecutive month.  Excluding fresh food, which is the BOJ preferred measure, fell -0.5% from a year ago.  The measure excluding food and energy slipped to 0.2% from 0.3%.  Tokyo reports its inflation figures with less of a lag, but the September data give little hope of a recovery in the national price measures.   

The BOJ reported that its staff, excluding managers, will be given a 0.2% pay increase in the base wage.  This follows a 0.6% increase in the FY15.  Although it is the third year that the base wage has increased, the small amount illustrates the similar pressure facing the private sector.  Weak wage increases are one of the factors holding back consumption.  Overall household spending fell 4.6% in August from a year ago.  The Bloomberg median was for a 2.1% decline.  Household spending has been contracting on a year-over-year basis since February. 

Industrial output rose 1.5% in August, which is three times what the median guesstimate projected.  The year-over-year pace rose to 4.6% from -4.2% in July.  Vehicle production rose 8.8% after a 4.1% slide in July.  Construction orders jumped 13.8% after a 10.9% fall in July.     Japan will report the Q3 Tankan survey early Monday in Tokyo.  Sentiment among the large manufacturers is expected to post a small increase, and capex plans are expected to improve from the 6.2% of Q2.”