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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