TOKYO – Japan’s core inflation rate edged up in March and unemployment eased slightly, according to data released Friday, offering glimmers of promise for the world’s No. 3 economy as it struggles to get growth back on track after years of stagnation.
Though a decline in factory output and other key measures were less encouraging, the central bank defied expectations it might expand its monetary stimulus, keeping its ultra-loose monetary policy unchanged in a policy meeting Thursday.
The central bank governor, Haruhiko Kuroda, acknowledged that his target of 2 per cent inflation, excluding for the impact from an April 2014 increase in the sales tax to 8 per cent from 5 per cent, remains elusive. He said it might take three years, instead of the two years he originally aimed for, to reach that goal.
Core inflation, excluding for volatile food prices, ticked up to 2.2 per cent in March from 2.0 per cent in February, the government reported. It said that excluding both food and energy prices, the consumer price index rose 2.1 per cent, compared with 2.0 per cent in February.
The unemployment rate slipped to 3.4 per cent in March from 3.5 per cent the month before, matching the level last seen in December.
Industrial production fell 1.2 per cent in March from a year earlier and 0.3 per cent from the month before, a milder decline than the more than 2 per cent drop many manufacturers and analysts had expected.
Prime Minister Shinzo Abe, on a U.S. tour, has sought to raise confidence in his government’s economic recovery strategy, which hinges on lavish monetary easing, public works spending and longer-term reforms.
The policies have yielded mixed results, with share prices soaring and the value of the yen plunging thanks to massive injections of cash into the economy by the central bank through its purchases of bonds and other assets.
The economy fell into recession following the sales tax increase that broadsided demand. The Bank of Japan expanded its asset purchases in October to help counter the malaise, but growth has remained flat despite a mild recovery in exports.
Weak demand from China and the U.S. may be hindering Japan’s efforts to boost growth. The U.S. economy expanded at a mere 0.2 per cent pace in January-March, the slowest rate in a year, and China’s economy has also slowed more than anticipated.
A key factor behind the feeble growth in the U.S. is a lack of corporate investment — a problem that Japan shares as companies opt to invest overseas rather than in a shrinking home market where the population is declining and fast aging.
Wages have also failed to pick up significantly for most workers, whose incomes are not keeping up even with the modest inflation seen so far under Abe. That in turn has undermined consumer demand, sapping growth.